The direct impact of the increase in international prices of crude oil is now going to be visible on the Indian economy and the pockets of the general public. According to a recent report by CareEdge Global, if the price of crude oil increases even by $ 10 per barrel, it can increase India’s inflation rate by 55 to 60 basis points. This estimate has been made for the financial year 2027, due to which petrol and diesel as well as other essential commodities may become expensive in the coming time.
What will be the impact on the general public and the economy?
The report states that fuel has a very high weight in India’s Consumer Price Index (CPI) basket. When crude oil prices rise, oil companies initially bear some of the pressure themselves, but if prices remain high for a long time, the burden is passed directly on to consumers. Additionally, a $10 rise in oil prices could also widen India’s current account deficit (CAD) by 30-40 basis points.
An increase in inflation rate from 0.55% to 0.60% is possible. India’s GDP growth is estimated to be between 6.5% to 6.8%. If crude oil crosses $100, the growth rate may fall to 6.6%. Increase in fuel prices makes freight transportation expensive.
What do the government and other experts say?
The Indian government is keeping an eye on the situation and Petroleum Minister Hardeep Puri had recently announced a reduction in excise duty on petrol and diesel by Rs 10 per liter to reduce the losses of oil companies and provide relief to the common man. Different institutions have presented their different figures regarding inflation, which can be seen in the table given below.
Name of the organization Estimated impact on inflation CareEdge Global 55-60 basis points ICICI Bank 50-60 basis points EY Report Increase up to 1.5 percent (in case of war) RBI Analysis Inflation increase by 30 basis points
