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IMPLICATIONS OF GLOBAL CRUDE OIL PRICE MOVEMENTS Any major change in global commodity prices, particularly crude oil prices, has implication for the external sector as India is increasingly integrated with the rest of the world. It is evident that India’s rising two-way external-sector transactions have more than doubled as a proportion of GDP over the last ten years. Trade openness provides opportunities for higher growth through higher exports and makes available better quality products domestically at globally competitive prices. Typically in the literature, current account deficit (CAD) is viewed as foreign savings that promote growth through higher investment given the level of domestic savings in EMDEs; but in the context of India’s large oil import dependence and the sharp rise in global crude oil prices, the widening of the CAD in 2011- 12 and 2012-13 may be an atypical outcome. Changes in crude oil prices have direct bearing on India’s CAD. Historically, crude oil imports accounted for a substantial portion of the country’s total imports. Petroleum, oil, and lubricants (POL) imports accounted for more than one-third of India’s total imports in recent years. In 2013-14, POL imports accounted for 36.6% of total imports. The share of POL imports in total imports is estimated at over 33% in the current fiscal year so far (up to December 2014). The changes in trade deficit and by implication CAD in recent years are largely explained by the changes in crude oil prices. |
- Within Asia, India’s exports to South Asia grew by 23.8% (mainly due to high export growth to Sri Lanka, Nepal, and Bangladesh) and 8.8% in the case of West Asia-Gulf Cooperation Council (GCC) (UAE, Saudi Arabia, and others).
- India’s exports to other regions of Asia witnessed a contraction—declining by 4.4% to North East Asia (consisting of China, Hong Kong, Japan), 7.2% to the Association of South East Asian Nations (ASEAN) (consisting of Singapore, Indonesia, Thailand, Malaysia), and 8.5% to Other West Asia (Iran, Israel, and others)—in 2014-15 (April-December).
- Country wise, India’s exports to the USA and UAE— major destinations with a share in India’s total exports of 12.5% and 9.7% respectively in 2013-14—grew by 11.2% and 11.9% in 2014-15 (April-December).
- However, India’s exports to China (4.7% share) and Belgium (2.0% share) declined by 14.7% and 10.7% during the same period. Since 2012-13, there has been a contraction in India’s exports to Singapore and Indonesia.
- The share of Europe in India’s imports also declined from 23.0% in 2004-05 to 15.8% in 2013-14 while the shares of Asia and Africa increased substantially from 35.6% and 3.6% in 2004-05 to 60.7% and 8.1% respectively in 2013-14. The share of America in India’s imports has also increased from 8.8% to 12.8% during the same period.
