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Last updated: 22 May, 2018  

Crude.9.thmb.jpg Oil, Rupee concerns

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Bikky Khosla | 22 May, 2018

First, the good news. Exports rose 5.17 percent in the month of April this year, compared to the same month last year. Definitely it's good news for the economy. But meanwhile two major challenges have emerged. The Rupee is tumbling, raising fear that the currency could weaken up to the level of 70 per dollar by December-end. Although the depreciated Rupee is seen as good news for exporters, overall it is likely to have a negative impact on the economy. Also, oil prices are rising, posing a massive threat to the economy.

According to official data released last week, exports during April 2018 were valued at US $ 25.91 billion as compared to US $ 24.64 Billion during April 2017, exhibiting a positive growth of 5.17 percent. It is good to see such acceleration in exports, but still it is difficult to overlook the fact that most labour-intensive and MSME-dominated sectors, including gems & jewellery, leather, readymade garments and handicrafts were into negative territory. Also, a rising trade deficit, with the crude imports bill swelling, is discouraging.

Coming to the Rupee, it is a big concern to the economy that the currency has fallen by 6 percent against the US dollar in 2018. According to some experts, this fall may extend up to 70 per dollar by December-end. While this currency downslide may help our exporters it may also lead to higher inflation and a tighter monetary policy by the central bank. Additionally, with India lacking qualitative or quantitative edge over its competitors, particularly China, it is likely that only select export sectors like software and pharmaceutical will benefit from a weak rupee.

Rise in crude prices poses a bigger challenge. Our economy was a key beneficiary of falling crude oil prices between 2013 and 2015. It pushed our GDP growth and also helped us to narrow the twin deficits. But now the situation is reversing fast, with rising oil prices posing a high risk to the economic growth trajectory. The Rupee is already under pressure and now inflation, trade deficit, balance of payments are likely to be affected by high crude prices. Needless to say, this situation requires urgent attention from the government.

I invite your opinions.

 
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Only solution is sulf dependency
R Parekh | Sat May 26 03:06:34 2018
It is every one's duty to see that we came out of this oil depedent economy. Use less personal vehicles. Walk where possible to do so. Farmers adviced to use their cattle wealth for irrigation / transportation. Govt also advised to boost draught cattle wealth of transportation.


Oil, Rupee concerns - PV on Crude
A.V. Chandran | Wed May 23 04:38:33 2018
Price Variation on Crude for the period 2014 to 2018 was in the decreasing return with corresponding macro revenue earned by the Nation through Oil Producing Companies without passing any benefit to the consumers. It is not understood whereas these macro revenue credited? Is it with the Oil producers or with the Govt of India? Central Govt must answer this question and must take confidence of Indian Parliament in this economic drama! If one and all deeply examine volume of extra income or surplus income, it could be more Rs.30 to 50 lakh crore for the period 2014 to 2018. only in the second quarter of 2018 crude price started increase. Price review is a must with 2% GST. For instance Petrol could be sold at Rs.40/ltr with 2% GST subject to 1% variation per year. Secondly Currency domination culture could be replaced by virtue of World One Currency Formula without any variation in the value of currency. In short currency must be firm and only material cost will be variable. If this formula is not in force developing countries will be looted by dominating countries like US,Europe etc.Lastly India has become rich in the crude imports at decreasing cost for the last 4 years and corresponding revenue with increasing return is equal to beyond rich! am i right? It could be verified by Parliament of the Great Nation on war footing without any delay and find out the leakage of revenue once for all!


Oil Rupee Concerns
SJS RAVI. | Wed May 23 03:39:52 2018
Even when the oil prices were ruling low, the govt hardly did anything substantial and frittered away the advantage by disrupting the economy by demonetization and a flawed GST. Not only was there a loss of momentum, the last two years can be called the lost years. When the manna was falling from the heavens, the Govt masqueraded as if it was some great performance on their part. Now that the wolf is at the door what is left in the kitty to bail us out? The international oil prices are not in our calling or control. With Iran US equation turning increasingly adverse, it will be difficult to look for succour there without getting on the wrong side of the TRUMP administration. In this light your last sentence about Govt addressing the problem is a cry in wilderness In spite of a thousand trips abroad and a thousand hugs, we may find ourselves utterly friendless in managing our impending economic disaster. God save my beloved India.


Rupee depreciation
Sanjeev | Wed May 23 00:56:13 2018
A good article. I will be happy if the Rupee goes down. I work outside India and earn salary in US$. For last 18 months, I am holding all of my savings outside India due to the problem created by Aadhaar card. I will wait till a new government comes to power in India in 2019. I BJP wins again, I will invest my savings in some other market. This government is against NRI.


US $ INR Forex rates
V k jain | Tue May 22 22:21:03 2018
Alarming downfall of INR. These columns must suggest ways to stop this decline. Top econmists shall put in their experience to this naive Govt. with total focus on politics only.


oil prices and USD
Ankur Sen | Tue May 22 20:57:26 2018
The price of crude had to find its mean levels of 100usd after touching a high of 130 usd not very long ago...this reversal was imminent and if the country has enjoyed a favourable currency reserves it's entirely due to this factor and not due to any good performance of the government or the country...the government of the day has levied the same amount of taxes on crude products and filled it's coffers..it's time to wake up to realities of global economics


 
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