India’s economic fortunes depend on oil prices
India’s economic fortunes depends on the sharply fluctuating price of oil. Prime Minister Narendra Modi urged
oil-producing countries to reduce the cost of energy in order to aid the global
economy in its path towards recovery. Modi
demanded the partial use of the rupee
instead of the U.S. dollar to pay for oil. Well over 80% of its oil demand is being met through imports by India. Oil
prices have risen by as much as 70% in rupee terms in the last one year.
There is an absence of significant rival suppliers in the global oil
market willing to help out India. India’s policymakers now face the difficult
task of safely steering the economy in the midst of multiple external
headwinds. The rupee, which is
down about 16% since the beginning of the year, doesn’t seem to be showing any
signs of recovery either. All this
will likely weigh negatively on the prospects of the Indian economy, the
world’s fastest-growing, in the coming quarters.
Another long-term solution to the oil problem will be to increasingly tap
into domestic sources of energy supply while simultaneously encouraging
consumers to switch to green alternatives. This will require a stronger policy
framework and implementation.
Policymakers should also be willing to think beyond just the next
election if India’s over-reliance on oil is to come to an end for good.
The scientific community does need to solve the energy crisis issue
urgently. All the economies have been facing energy crisis. There is an urgent
need to discover cheaper and efficient alternate renewable sources of energy.
If this issue is resolved the economies can prosper further.
Oil producing countries must reduce the price of the oil in order to aid
the Global Economy. OPEC will set oil
price if it is in their interest. Diversification of energy sources is the only
way to rein in oil prices. Aid comes out of another pocket.
Yes, a catch 22 situation for the developing countries like India: Our
attempts to empower the poor and backward primarily through freebies and
crutches of one kind or the other - and the state governments adding to the
worries in similar ways - may be politically smart but must fail the test on
economic principles. You cannot 'rob Peter to pay Paul' and find untenable
justification. Poor quality governance, lack of courage to confront realities
are beginning to show up.
Energy consumption in the form of petroleum for personal and public
transport has been increasing; this is in addition to international anxieties--petroleum
exporting countries ever in need/desire for more dollars/prices for their ware.
India has in effect equated Development with increased production, sale and use
of cars, scooters and trucks; and possibly trains and airplanes. Petroleum consumption
and concomitant Economy distress problems including CAD is a part of cost
escalation trends; failure to pursue regional self-sufficiency goals,
fulfilling basic needs through reliance on local production and consumption.
Instead reliance on long haul transport, dependence on Andhra rice and chillies
in Karnataka, for example. Public transport has to be emphasised in city
planning and road development; this should include decentralisation and
relocation of industries. Indeed a reorientation in Capital deployment and
Urbanisation; retention of capital in rural areas of India.
The constraint created on oil price is unsolvable at this juncture of
increasing demand for oil both for industrial and transport purpose. OPEC are
restricting production and refuse to work for free supply and will not concede
for reducing prices and rupee acceptance. The way is to increase the domestic
production and reduce the demand. The feasible way is to stop selling auto
vehicles on hire purchase selling which are flooding the number of auto
vehicles both for four wheeler and two wheelers and to reduce rationalised use
of them will reduce the demand for oil. Otherwise petrol and diesel will be
available through rationed supply.
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