What is the impact of high crude oil prices on India's GDP growth in FY24
India's NITI Aayog member Arvind Virmani predicts India's GDP growth in FY24 despite high crude oil prices.
The impact of high crude oil prices on India's GDP growth in FY24 is expected to be as follows:
- Increased Input Costs: High crude oil prices lead to an increase in fuel prices, which affects transportation costs and production expenses for industries. This can result in higher inflation and reduced profit margins for businesses.
- Pressure on Current Account Balance: India is heavily dependent on crude oil imports, and high prices result in a higher import bill. This affects the current account balance and puts pressure on the country's foreign exchange reserves.
- Inflationary Pressure: Elevated crude oil prices contribute to higher inflation rates as fuel costs influence various sectors of the economy. This can pose challenges in managing price stability and potentially impact consumer spending.
- Fiscal Challenges: The government may face challenges in managing its fiscal deficit due to higher subsidies on fuel and the need to balance revenue generation and welfare measures.
- Indirect Impact on Other Industries: Industries such as transportation, manufacturing, and aviation, which rely heavily on fuel as an input, may face difficulties due to increased operating costs, potentially leading to reduced production and job cuts.
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