How oil prices will impact personal finances?
Know exactly how oil prices impact your personal finances. How this biggest import commodity of India not only affects Government finances but impacts the finances of the common man. Know how exactly are your going to be impacted, where and if there is any way to lower the impact.
Though oil prices are steady as US has reported that its production has crossed the benchmark level production and OPEC members are considering boosting the supply to balance the global demand, but on the face of it, the oil stocks still look in a painful territory. The geopolitical uncertainty in the middle-east (Saudi Arabia and Russia) can be blamed for it. However, not many of us know that these tensions can have a drastic impact on our economy and on our personal finances. But before that let's understand why India's economy will suffer?
How will oil prices impact India?
Around 70% of India's of oil consumption depends upon the foreign countries. And after this crash, it is believed that India's import bill will get fatter and it will widen its fiscal deficit and the inflation rate.
Slow- down of FII inflows- As told above, the rise in oil price would burden the fiscal and current account deficit and it will further slow- down the FII inflows in the market. This would narrow down our growth rate and bring reform initiatives will be put on a hold.
How will it impact the Indian household?
Increase the inflation rate-Rising oil prices offers the biggest threat to the Indian economy as it would shrink down the real income and spending. India has largely benefited a lot from low oil prices in the last three year, but this threat would wipe down the advantage.
According to the economic survey, it is estimated that a $10 barrel increase in the oil price will reduce the growth by 0.2-0.3% thus increasing the inflation rate by 1.7% and worsen the current account deficit
The rise in the price of white goods-Logistic companies plays a major role in offering essential household consumables and due to the rise in fuel price, the products transported through it would become expensive. So, it is expected that there would be a sharp hike in fruits, vegetables, and other items that we consume on a regular basis. It will definitely wreck the household budget.
Can marathon man Narendra Modi control this disaster?
Well, our honourable prime minister has taken various steps to spur up the growth marred by the disruptions and due to his efforts, India has regained its fastest growing economy tag with a growth rate exceeding more than 7% in a year. But the question is will he be able to take India from this stressed situation? The government can control the same by using the alternative sources of energy like electric energy, solar energy, hydroelectric energy to curb the menace created. It can reduce the price of petrol by lowering down the various taxes imposed, subsidize the fuel though nothing can be controlled from the outside factors, except a dialogue.
High prices of petrol and diesel have definitely speculated towards the rising concerns that the public might face but this time the stakes are high because regulating the oil price are beyond our control. India definitely needs to find out a long-term solution for it.