The single variable most strongly associated with India's macro-economic trends is the price of crude oil. The correlation is negative. When crude prices are high, GDP growth suffers and there are rising trade deficits and rising fiscal deficits.
Energy is, by far, the single largest item in the import basket. India imports over 80 per cent of its crude. It also imports about 50 per cent of its gas. The mitigating factor is that India is a net exporter of products like diesel and petrol. Even so, imports far exceed exports, leading to higher trade deficits if crude prices rise.
The government
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
