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'Rupee fall taking away benefits of lower crude prices'
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SME Times News Bureau | 07 Jun, 2012
International oil prices and rupee exchange rate have been moving in opposite directions, thus denying the benefit of drop in rates of crude in the international market to the Indian consumers, an ASSOCHAM study has revealed.
The study, which looked at the dynamics of oil prices and India’s import bill between April 2009 and May 2012, revealed that there have been instances when the international price of crude oil and exchange rate have been moving in different directions. Yet, oil import bill in rupee terms largely shows an increasing pattern.
“Possible indicates that the benefits of lower international prices were either offset by a faster depreciating rupee or a slower appreciating rupee could not offset the negative effect of a sharper rise in international crude oil prices thereby resulting in a higher import bill," said ASSOCHAM president R. N. Dhoot.
The chamber said the crude oil imports and its impact on government finances is dependent on the import quantity, the international price of crude oil and the exchange rate.
Dhoot further said that both the international prices and exchange rate are difficult to regulate so therefore, given the runaway import bill the only policy option left is to curb the demand.
He also mentioned that it was time the country showed austerity in oil consumption. "This will address a plethora of problems such as rising trade deficit, a bulging fuel subsidy bill and other macro imbalances," Dhoot added.
The study highlighted, seen from 2002-03, India’s crude oil import bill in rupee terms shows a whopping 500 percent increase in the last eight to nine years. Significantly, the increase did not result from only the rising prices but also from the increasing quantity of crude imports.
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