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Price Drops in Crude Oil Help India’s Economy

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India is a heavy importer of fuel. Therefore, their economy is more sensitive to changes in energy prices than other countries. Commodity prices around the world are in a slump, especially for energy products such as oil, gas, and coal. This is proving to be a good thing for India’s economy, particularly in their manufacturing sector.In past years, inflation has been a major problem for India. Now, inflation in India is at the lowest it’s been in five years. There are even reports that India’s finance minister wants to cut interest rates in the country to boost the economy further.

The energy sector is really what has been holding back India’s economy. Now that coal and other energy commodity prices are low, India can afford to power its manufacturing plants. Crude-oil has dropped to $85 per barrel in October. Back in June, a barrel cost as much as $110. This means India is spending less on imports and enjoying the benefits. To put things into perspective, Sujan Hajra from Anand Rathi Securities reports that every time the price of a barrel of crude-oil drops by a dollar, India’s economy sees a gross savings of $1 billion.

India’s manufacturing sector is obviously taking advantage of the commodity price slump in the world, and the energy sector is also benefiting. There is still some concern that India’s agriculture sector cannot keep up because of weather problems, but things overall are looking good for India’s economy right now. India has even taken crude-oil price drops as an opportunity to refine their fuel industry. The government is no longer in control, which cuts down on their annual subsidy bill.

The price drops in crude-oil may be hurting the economies of other countries that produce it, but India is doing well.

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