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Impact of oil shocks on indian economy

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Information about Impact of oil shocks on indian economy
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Published on November 13, 2009

Author: anshulsudamagupta

Source: authorstream.com

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IMPACT OF OIL SHOCKS ON THE INDIAN ECONOMY : IMPACT OF OIL SHOCKS ON THE INDIAN ECONOMY (Group-9) Section - B ANSHUL GUPTA 068 ARJUN M 070 GOPAL AVASTHI 079 KAUSHIK AGARAWAL 087 OMKAR PARNANDIVAR 097 RIDHHI JAIN 109 Outline : Outline Determinants of oil prices Oil demand in India & China Oil shocks transmission India’s oil dependence Different elastic ties Crude oil prices Impact on India’s GDP and inflation Steps taken by the Govt. and RBI to minimize the impact Conclusions Determinants of Oil Prices : Determinants of Oil Prices Demand economic & population growth Supply reserves & production flow rates investment OPEC conflict & resource nationalism Expectations, risk & speculation Oil Shock Transmission : Oil Shock Transmission Short run: inflation (imported & domestic) current account balance exchange rate volatility monetary policy response Long run: conservation & efficiency substitution of energy & capital INDIA’s Oil Dependence : INDIA’s Oil Dependence Moderate oil intensity (3.5% of GDP) Low oil resource intensity (15% of energy) High oil import dependency (70%) synthetic fuels comprise: 13.6% in 1970s to 22% in 2008, of liquid fuels Transport 83% dependent on liquid fuels Price & income elasticities : Price & income elasticities Slide 8: Source: IMF IMPACT OF OIL PRICES ON GDP GROWTH : IMPACT OF OIL PRICES ON GDP GROWTH Impact of increase in oil prices on growth and inflation levels in India : Impact of increase in oil prices on growth and inflation levels in India Impact on inflation : Impact on inflation Inflation has a inverse relationship with other three Steps taken by the govt. and rbi : Steps taken by the govt. and rbi What Govt. did ? 1. Provided huge amount of subsidies to oil companies to keep them solvent. 2. This increased domestic prices of diesel and petrol. 3. Start looking for alternate energy options to prevent future oil shocks. What RBI did? Increase in CRR, Repo rates. (i.e. used monetary tools to calm down the heat) Conclusion : Conclusion To summarize the study When Oil prices Moves UP : Inflation increases Govt. spending on subsidy increases Foreign currency reserves deplete Our export becomes weaker GDP is affected negatively Share market crumbles Investment decreases Slide 14: THANK YOU

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