India's biggest threat investors see as high oil price
India's biggest threat investors see as high oil price
High oil prices is a risk to India's economy.Based on an investor survey Moody's Investors Service said that most of respondents pointed high oil prices as top risk,30.3% of those in Singapore picked rising interest rates as next top risk & 23.1% from Mumbai picked domestic political risks as 2nd top risk.India would not meet central government's fiscal deficit target of 3.3% of GDP for current fiscal.Rating agency's report is based on a survey of 175 respondents.
According to a majority of Indian and foreign investors high oil prices have become a risk to India's economy.
Based on an investor survey Moody's Investors Service said that most of the respondents pointed high oil prices as the top risk, 30.3 per cent of those in Singapore picked rising interest rates as the next top risk and 23.1 per cent of those in Mumbai picked domestic political risks as the second top risk.
Moody's vice-president said the report is based on investor feedback on issues such as top risks facing the Indian economy, fiscal deficit, the recapitalisation package for public sector banks and credit conditions for Indian corporates.
India would not meet the central government's fiscal deficit target of 3.3 per cent of GDP for the current fiscal, as per most respondents.
The rating agency's report is based on a survey of 175 respondents.
Economists believe the oil price hike would put pressure on fiscal and current account deficits in the year ahead as India imports more than 70 per cent of its oil requirement.
High oil prices will adversely impact all major macroeconomic variables such as current account, currency, inflation, interest rate, fiscal deficit, GDP growth and conduct of monetary policy, they said.
India's petroleum and natural gas ministry estimates the country's crude oil import bill may increase by 20 per cent to $105 billion in this financial year from $88 billion in 2017-18.
The estimate assumes an average crude oil price of $65 per barrel for the year, about $8-9 a barrel less than the current rate.
In the current financial year ending March 2019, analysts estimate that high crude oil prices will inflate India's current account deficit between $22 billion and $31 billion.
India imports about 1,575 million barrels of crude oil per annum and a dollar increase in oil prices would increase the import bill by about $1.6 billion on an annual basis, said CARE Ratings. The same is also the impact when currency exchange rate fluctuates by Re 1 per US dollar.
Similarly, every $10 per barrel rise in the price will worsen India's fiscal balance by 0.1 per cent and current account balance by 0.4 per cent of GDP, according to estimates of global financial services major Nomura.
Former chief economic adviser to the government Arvind Subramanian has said every $10 per barrel rise in oil price brings down GDP growth by around $9-10 billion.
Two months ago, Moody's cut India's growth forecast to 7.3 per cent for 2018 from 7.5 per cent projected earlier on the back of higher oil prices. Ref. : https://www.zawya.com/mena/en/story/Investors_see_high_oil_price_as_Indias_biggest_threat-SNG_120183848/ --- Dated: Jul'04,2018
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