India’s oil import bill leaped 40 per cent to a record $140 billion in Financial Year 2011-12 as high oil prices shaved off much of the nation’s GDP growth rate, Oil Minister S Jaipal Reddy said today.
Speaking at the 5th OPEC International Seminar in Vienna, Reddy said it was “estimated that a sustained $10 increase in oil prices lead to a 1.5 per cent reduction in the GDP of developing countries“.
“We have seen evidence of this in our own country: India’s GDP grew at 6.9 per cent during the last financial year (2011-12) down from the 8 per cent plus growth rate experienced in the past few years,” he said.
Reddy, whose speech copy was released by his office here, said between the 2010-11 and 2011-12, the world’s fourth largest oil importer saw its average cost of imported crude oil rising by $27 per barrel, “making India’s oil import bill rise from $100 billion to $140 billion dollars“.
“Higher international oil prices lead to domestic inflation, increased input costs, an increase in the budget deficit which invariably drives up interest rates and slows down the economic growth,” he said.
Also, net oil importing countries like India experience a deterioration in their balance of payments, putting downward pressure on exchange rates.
“As a result, imports become more expensive and exports less valuable, leading to a drop in real national income,” he said. “There could not be a more direct cause and effect relation than high oil prices retarding economic growth of oil importing countries”.
Keywords: import bill, international oil prices, domestic inflation, interest rates, exchange rates, economic growth
The explanation of the speculative rise in oil prices is given very lucidly in Keiser Report: Cuckoo Trading (E299) available on Youtube. India must protect itself from foreign banks ruining its economy.
However it is important to note where all this oil is being spent. Govts. are still not learning their lesson and most states neglect public transport in favour of private transport. As more and more private vehicles hit the road, you will only see your oil import bill rise. And this is happening despite per unit fuel prices rising in the country.
The Government must actively consider Ethanol blending program as done in Brazil and US. Instead of allowing wheat and food grains to rot in open, they can be converted to Ethanol as done in Canada.
What are the planners doing about it? For both short and long runs, India needs to find a solution. One way of doing this is to levy higher taxes on automobiles and petrol and provide stimulus - tax breaks etc., for alternative fuel vehicles. India is close to the equator and there is plenty of sunlight.
The Indira Congress party has to think in the following terms:- 1.Do away with the LIES called, "under-recoveries", which were started ONLY in 2004,when M M Singh became PM of India.The amount is a mammoth,Rs 1,38,000 CRORES PER YEAR and is a SCAM.This has to be stopped and investigated. 2.REDUCE import of Crude, when the prices are HIGH and ration petroleum products, till the price of Crude comes down.There is no point in increasing the prices of petroleum products. Indians are NOT fools and they do not trust, the Oil Ministry,Finance Ministry and the OMCs,who are making monkeys of Indians with LIES galore,to benefit the private players like Mittal and 'THE MNC.
and yet we keep relying on oil, increasing our dependence on it, pumping in more subsidies for an ever more economically unviable source of energy rather than trying to diversify and transition to renewables or even making better MRT systems and incentivizing public transport for that matter. The subsidies given for diesel, kerosene and LPG alone amounted to INR 1,90,000 crores. The US has in this while shifted to shale gas and meets over 80% of its energy needs domestically while we for the want of populism and lack of visionary leaders, continue to increase oil and coal imports relentlessly. Peak oil will have our economy tumbling down in little to no time.
We hardly have any innovative strategy to meet with any situation. This needs a lot of thinking and implementation. Unless solar power is exploited in full using the best technology available in the coming years, our energy requirements cannot be met. Also we must drastically reduce our oil needs by resorting to other methods. Lastly,our political leadership is devoid of ideas which only time has to change.
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