Impact Of Rising Prices Of Petrol And Diesel On The Indian Economy

The high prices of petrol and diesel have reached unprecedented levels since the first quarter of 2015-16. The price of petrol has climbed to a record high of ₹86.24 per litre on May 29 in Mumbai and diesel has increased to a price of ₹73.79 per litre which the highest in India.

- Devajyoti Haldar

Asymmetrical relationship with the price of oil in global market

According to market experts, it has been seen that when the price of oil increases in the global market, prices of oil in India also increases. But when the price in .global market reduces, the prices of oil in India are often not reduced

Fall of GDP

The Economic Survey 2018 states that every $10 per barrel increase in the price of oil will reduce the GDP growth by 0.2% to 0.3% points. The survey has also stated that India’s economic growth is expected to grow between 7% and 7.5% in the fiscal year 2019. But this growth may be hampered because of the rising prices of oil.

Fall in stock market

The rising prices of oil have also impacted the stock market. Jayanti Das, an economist, told BE, “The price hike of petrol and diesel causes inflation which influences RBI to increase the interest rates. This rising interest rate causes drop in indices and therefore the share prices slip.” She also clarified that small changes in the prices of oil do not significantly hamper the stock market. But the present condition, where oil prices are showing drastic upward changes, is surely going to impact the share market.

Relationship between oil prices and inflation