Rising Oil Price Stagflation

 

The Crude Oil prices touched almost 10,600 rupees per barrel mark, which was around 5,300 in December. Now, the main reasons for an increase in Oil Prices.

Of course, one of the most important reasons is the decision made by USA to ban the purchase of Russian Oil in response to the invasion of Ukraine. Russia is the world’s second-largest producer of oil so if the oil is kept out of the world market for so long, it will not only lead to prices touching the peak, but will remain the same for way too long.How India will get affected to the rising of Oil Prices.

While our country is not directly related or involved in the war, but it will get badly affected if oil prices move higher and stay that way. India is a large importer of oil. It imports more than 84% of its total oil demand and increase in the prices of oil is going to increase our import bill further widening the Current Account Deficit. Also rise in crude Oil prices will lead to rise in prices of Petrol and Diesel, if the government doesn’t cut its taxes. The Higher the price of Petrol and Diesel the higher the rate of Inflation and general price level. If the rate of Inflation kept on increasing, it will create a huge disturbance in our country, thus bringing down overall demand. India as a country already lags behind in Consumer Demand, if the prices of oil kept rising it will hurt our economy and will create Unemployment crisis leading to even lower incomes.

Stagflation is an economic condition of stagnant growth and persistently high inflation. Usually, Inflation happens when the economy is booming- people are earning more, demanding lots of goods and services and as a result the prices keep going up. But, when the demand gets low, prices tend to stagnate (or even fall). But stagflation is a condition where an economy experiences the worst of both the worlds- the growth is stagnant along with rising of unemployment and inflation is very high.

Now is Stagflation a threat in India due to rising Oil prices

Obviously, it’s not going to impact India in a good manner but, if the oil prices stay high for too long, the inflation will get worse which will badly affect our Indian Economy (which has been already down after lockdown). This inflation will rise the amount of unemployment. Our country already has been facing this issue in the past five decades. So, yes it can badly affect our country and we could be looking at stagflation in the near future.

   

  Tarni Rana  FYBA073

  tarnirana2@gmail.com 

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