India’s import bill for crude oil is expected to rise sharply despite the fall in the international price of the fuel in recent months, because of depreciation in rupee.
The global price of crude oil declined almost 10 percent since January 2013. However, the import bill of the country may rise because of depreciation rupee against the dollar, reports indicate.
Even if we compare the period between 2008 and 2013, we arrive at the same conclusion. The rupee exchange rate, which stood at Rs 39.40 a dollar on July 3, 2008, depreciated to Rs 59.52 on July 1, 2013.
But a barrel of brent crude oil cost $145.66 on July 3, 2008 and this declined to $102.16 in recent days. But India is unable to take advantage of the fall in global oil price because of depreciating rupee.
It may be noted that the rise in crude oil import bill would raise the fuel subsidy burden of the central government.
This would make the government’s aim to attain the fiscal deficit target of 4.8 percent of the GDP for the financial year 2014 more difficult.
Some analysts feel that the government would be able to control its fuel subsidy bill at the targeted amount for 2013-14 only if the global crude prices averages around $95 per barrel and the rupee around 53-54.
Owing to volatility in rupee exchange rate, analysts expect the subsidy bill for oil and fertiliser to rise 0.3-0.4 percent of GDP.
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