India’s fiscal maths and inflation calculations will not be impacted if the price of oil remains below $60/barrel, the junior finance minister was quoted as saying.
Oil prices, which fell dramatically last year, have been inching up and it a 11-month high of $50/barrel recently, raising fears that India – which imports nearly 80 percent of its needs – will be hit badly as its oil bill shoots up.
Minister of State for Finance Jayant Sinha said the Indian economy will be “fine” if the oil price stays in the range of $40-60 per barrel, but there could be a concern if it goes beyond, according to the Press Trust of India (PTI).
India, which depends on imports to meet 80 per cent of its oil needs, will have to spend Rs 9,126 crore ($1.36 billion) more every year for one dollar per barrel increase in crude oil. Besides, the rising crude oil trajectory impacts inflation and growth, PTI said.
“If oil prices stay in the range that most forecasters are expecting them to be, which is in the $40-60 dollar range, then I think we will be fine. If it goes beyond that range, then it becomes a question,” Sinha told PTI.
India spent $63.96 billion on crude oil import in 2015-16, about half of $112.7 billion outgo in the previous fiscal and $143 billion in 2013-14. For the current fiscal, the import bill has been pegged at $66 billion at an average import price of $48 per barrel.
Domestic petrol prices have been hiked five times since March, totalling Rs 8.99 a litre while diesel rates have been increased by Rs 9.79 per litre as international oil prices climbed to $50 per barrel for the first time since October 2015.