Page 10 - CII Artha Magazine 2022

Domestic Trends

Resurrecting 2. Impact on Current 10 8.7 Imports from Russia as % of India's Total Imports high forex reserves

should allow RBI to
Account Deficit (CAD)
intervene in the forex
Though our oil import
market and keep the
volumes do negatively to
rupee fairly stable. The RBI
increases in international
Growth Amidst oil prices, but they are still 8 6 4 2 0 3.9 3.6 Stones 2.7 2.6 Vegetbale oil 2.2 1.5 1.3 Aluminium 1.2 Iron & Steel 0.9 has already done so
successfully since March
inelastic in the short run.
2022. To be sure, India’s
On the other hand, our oil
foreign exchange reserves
import values very closely
have risen significantly in
Pearl, Precs, Semiprecs
Petroleum products
Petroleum: Crude
Inorganic Chemicals
follow changes in the
the last two years to
Challenges international crude oil Fertilizers Manufactured Coal, Coke & Briquittes Source: Ministry of Commerce & CII Research Aluminium, Products of Plastic Raw Materials touch a record high of
prices. Thus, as brent prices
US$641 billion in August
rise, India's oil import bill
2021. It continued to
significantly jumps up.
remain above US$600
Fortunately, one-third of
US$598 billion in April
India's oil imports are billion, before declining to
re-exported after refining As the world’s third largest India’s growth prospects. 2022 given the global
and other value addition. It importer of oil, India relies CII Research estimates headwinds. These are
mirrors the path of India’s on other countries for show that a US$10/barrel substantial to cover our
oil imports: thus, mitigating more than 80 per cent of rise in brent oil prices can import bill and also
about one third of India's its crude oil requirements. bring down GDP growth by manage our exchange rate.
A fter witnessing a Impact of 1. Impact on Inflation on the headline inflation in crude oil trade deficit. In 2020-21, India imported around 40 basis points. Looking forward, CII
the months to come,
tumultuous period
petroleum crude worth
which saw the economy Russia-Ukraine Brent crude oil crossed through the imported CII Research estimates US$944.0 million from Going forward, oil prices expects growth to come
in a range of 7.4-8.2 per
the critical threshold of
show that a US$10/barrel
are likely to moderate in
facing pandemic induced US$100 per barrel mark inflation channel. increase will lead to an Russia, which contributed a FY23, as the conflict nears cent in the current fiscal
economy is expected to post Stand-off on on 24 February for the CII Research estimates additional US$11.58 billion share of 1.6 per cent in the resolution. At the present from an expected 8.9 per
contraction, the Indian
th
country’s total petroleum
cent in the previous fiscal.
merchandise trade deficit,
first time since 2014 and is
show that a US$10/barrel
real GDP is expected to rise the Indian currently hovering around increase at US$100/barrel which roughly translates to The other commodities juncture, it is critical to It is pertinent to add here
crude imports.
an impressive recovery as the
nurture the incipient signs
that if the global crude oil
a 37 basis points rise in
those levels only.
will have a total (direct +
of growth recovery. But
However, as the horizon was Economy CII Research analysis indirect) impact of around India’s CAD/GDP ratio. imported from Russia in certainly, the Russia-Ukraine continues to remain
by 8.9 per cent in 2021-22.
above US$100/barrel for
30 basis points on overall
crisis has made things
2020-21 include petroleum
brightening, the ongoing shows that there exists a CPI inflation. India recorded a products, precious stones tougher for India on the larger part of the year,
CAD/GDP ratio of 1.2 per
significant pass-through of
Eastern European conflict and The Russia-Ukraine border high global crude prices on With CPI inflation having cent in April-December and precious metals, economic front. growth will come
a resurgence of COVID-19 stand-off, escalated into a retail pump prices (except breached the RBI’s upper 2021 with Q3 numbers petroleum products, coal, The conflict has also towards the lower end of
th
infections in some major full-blown conflict on 24 during few events such as target range since January standing at 2.7 per cent. fertilizers, vegetable oils, affected the rupee, which this range and if some
moderation happens, then
economies have dampened February with Russian elections), which in turn is 2022, the rising oil prices The recent rise in oil price amongst others. has been depreciating. we can expect growth
the domestic recovery military forces making reflected in the fuel have exacerbated the is thus likely to push up 4. Challenging Times and However, India’s record around 8.2 per cent.
substantial advancement into
impulses through elevated Ukraine. This event is component of both CPI & upside risks. In lieu of this, CAD close to 2 percent of Tough Decisions Lie Ahead
commodity prices and global expected to have WPI inflation. This is RBI hiked the repo rate by GDP for FY22. This is a
spill over channels. India, too, ramifications on growth & expected to pose a a steep 40 bps in an significant rise from a 0.9 Rising oil prices, capital
has borne some impact from other key macro indicators considerable upward risk off-cycle meeting. per cent current account flight and rupee
depreciation can present a
the uncertainties on the across the global economies, surplus in FY21. triple burden for India.
global horizon. A detailed which had just started to 3. India’s imports from Russia These will push up
analysis of the impact of the slowly inch towards normalcy Trend in Brent Prices and Oil Imports domestic inflation and
Russia-Ukraine stand-off on after subsequent deadly India shares a special and current account deficit.
the Indian economy is waves of the pandemic. 300.00 privileged strategic In case the government
250.00
partnership with Russia,
captured below. 200.00 however, both Russia and decides to protect the
In the subsequent paragraphs, 150.00 Ukraine are not major consumer from high oil
the impact of the ongoing % change from last year 100.00 prices by reducing taxes,
INCREASING geopolitical tensions on the 50.00 trading partners of India. the fiscal deficit would go
GEOPOLITICAL key macroeconomic 0.00 The ongoing up and complicate the
TENSIONS HAVE indicators of the Indian Russia-Ukraine crisis is fiscal consolidation plan of
expected to have a
EXACERBATED RISKS economy has been analysed: Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 negligible impact on India’s bringing the deficit down
FOR INDIA foreign trade, especially to 4.5 per cent by 2025-26.
oil imports value ($ billions) brent $/barrel oil imports volume (million barrels) This will make
when it comes to import
Source: Ministry of Commerce & Energy Information Administration (EIA) of commodities like growth-inflation trade off
petroleum crude. tougher and can constrain
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