Low Oil Price & Surplus Monsoon Provides an optimistic Way to Revive Economic Growth

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By admin September 11, 2019 16:11

Low Oil Price & Surplus Monsoon Provides an Optimistic Way to Revive Economic Growth:

  • In a period where economic growth is slowing down this article is optimistic about reviving the economy with a surplus monsoon and low crude oil price and also by taking care of other measures that impede growth.

Background

  • Mahindra Group Chairman Anand Mahindra tweeted yesterday on how a surplus monsoon and low crude oil prices could take the economy back to a high growth path.

Why oil prices are expected to below?

  • In August, the average price of the Indian crude oil basket was $59.35 per barrel. This is lower than the $71 per barrel price in April and almost equal to January which stood at $59.27 per barrel.
  • Despite best efforts from OPEC to increase prices, it has remained low mainly due to,
  • The weakening growth forecast for most economies of the world.
  • The global shift in automobiles and fossil fuel-based power towards renewables like electric, solar and wind.
  • The US, which used to be a net crude importer, has now started producing and exporting oil.

So, oil prices are expected to remain low in the coming months too.

How has the progress of the monsoon been?

Monsoon rainfall, initially started slow, from a deficit of 35% at the end of June, but now rains across India are 3% above normal.

How could these two benefits the economy?

  • For example,

  • A healthy monsoon will lead to good crop production, benefiting farmers. This directly helps consumer companies and makers of paint and cement.
  • Similarly, low crude oil prices will save the country precious foreign exchange and help farmers and companies control their energy spend.

Way Forward

Good monsoon and low oil prices, only are not enough to revive the demand it has to be supplemented with other measures.

Increase Private Investment: For example, Lack of private investments over the past few years, subdued demand and trade tensions and large imports of electronics from China are hurting the Indian economy.

Rationalize Government spending on unproductive social welfare schemes

Clear out high NPA’s reeling under India’s banking and NBFC sector in a fast-paced manner.

Address problems in important sectors like auto and energy that are undergoing structural changes, hurting jobs and growth.

 

Read More: Economic Survey 2018-2019 Analysis  |  Dip and rise in GDP part of growth  |  Jobless Growth Becomes More Systemic

admin
By admin September 11, 2019 16:11