India to benefit from fall in oil prices:Economist group

Oil prices were falling because of weaker global economy and they would be a cushion rather than a spur to growth in the Asian region as a whole, the Capital Economics (Asia) Pte Ltd said in its weekly report.

The US dollar price of Brent crude has fallen by about USD 30 per barrel (pb) since early May to stand at around USD 90pb, it noted, adding: "We expect the decline to be sustained and indeed see further falls ahead.

"India would also get much needed relief from lower oil prices", it said adding high oil prices have pushed up its current account deficit recently and contributed to the rupee's depreciation.

 

Most Asian countries would welcome lower oil prices, which would provide relief in several ways, such as lower headline inflation and give the central banks more room to cut interest rates if needed to support growth, it said.

Subsidies giving countries would benefit from the lower prices, especially India, where fuel, food and fertiliser subsidies cost more than two per cent of GDP a year, it said.

In Indonesia, spending on subsidies accounts for approximately 15 per cent of total government spending, and the lower oil prices would clearly come as a relief for governments struggling to pay their subsidy bills.

The external balances of most Asian countries would also improve, except for net oil exporters Malaysia and Vietnam, it said.