Crude oil prices in the international market have fallen below the psychological level of $80 per barrel. This decline has come due to the peace agreement between the US and Iran and the reopening of the Strait of Hormuz. Today Brent crude is trading at $79.46 per barrel, while WTI is at $76.54. India imports about 85 percent of its total crude oil needs, so this drop in prices is a welcome gift.
The fall in crude oil prices has eliminated the risk of increase in prices of petrol and diesel and has raised hopes of a reduction in prices – which brings great relief to the common man. Increase in fuel prices generally increases the cost of transportation and freight, which increases the market prices of fruits, vegetables and daily essentials.
** Rupee strengthened **
The Indian rupee is expected to stabilize and strengthen due to reduced demand for dollars for oil imports. Apart from this, with inflation under control, the Reserve Bank of India will not need to increase interest rates, which will pave the way for cheap loans.
**Fiscal deficit under control**
For the annual budget of the government and the economic condition of the country, the fall of crude oil prices below $80 acts like a ‘booster dose’. Due to continuous fall in crude oil prices, the country’s import bill reduces, due to which the current account deficit remains under control. High crude oil prices increase the burden of government subsidies on LPG and fertilizers; This financial pressure will be reduced due to cheaper oil. Although the total subsidy expenditure may still be higher than the budget estimate, it will provide a major relief to the government in controlling the immediate fiscal deficit.
**Impact on stock market**
The fall in crude oil prices may give a boost to the stock market. This will have a direct impact on the shares of some companies and sectors. India’s oil marketing companies import crude oil and process it into petrol and diesel.