oppn parties OPEC's Move Will Lead To Difficulties For India
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February 04, 2023

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  • The Centre today said that there were no systemic issues linked to financial markets invloved in the crash of Adani group shares and market regulators were capable of doing what was needed. It said there is no need for the government to step in
  • Nearly 96% of the candidates appeared for the JEE(Mains) exam in the January session, making it the all-time high attendance
  • The Union budget has provided that input tax credit will not be available to companies on products and services they procure to fulfill their CSR obligations
  • Bombay HC rules that an FIR can be quashed even if a person is convicted in a trial court if an appeal in the case is pending before a higher court
  • Supreme Court thrwos out PIL seeking one candidate, one seat in elections, says it is the call of the legislature
  • Law minister Kiren Rijiju said that the government remained committed to diversity in selection of judges
  • Mamata Banerjee alleges that due to government pressure on public financial institutions to invest in Adani group, deposits in LIC and banks have become vulnerable
  • Kerala journalist Siddique Kappan was finally released from Lucknow jail, 28 months after his arrest by UP police in a UAPA case and more than 20 days after he was granted bail by Allahabad HC
  • A 65-year-old woman who was alone at home was hit on the head with a hammer and robbed in Kolkata
  • Enforcement Directorate charges that Arvind Kejriwal connived with Delhi liquor scam accused, court takes congnizance of charge sheet
  • Opposition stalls Parliament, demand probe into the Adani controversy. Says government forced LIC, SBI and other public institutions to invest in Adani group companies
  • RBI seeks information from banks about their exposure to the Adani group
  • BSE and NSE initiate additional risk-containment measures to counter the rout in Adani shares
  • Adani group shares free fall continues unabated: led by Adani Enterprises and Adani Total Gas,group companies lose 45.7% marekt capitalization in just 6 trading sessions
  • Stock market insulates itself from fall in Adani group shares. Sensex ends in green after another volatile session while Nifty ends in red but flat: Sensex gains 224 points to 59932 and Nifty loses 5 points to 17610
Free fall in Adani group shares continues unabated, Opposition parties demand a probe by a joint parliamentary committee or a Supreme Court-appointed panel
oppn parties
OPEC's Move Will Lead To Difficulties For India

By Linus Garg
First publised on 2022-10-07 06:39:39

About the Author

Sunil Garodia Linus tackles things head-on. He takes sides in his analysis and it fits excellently with our editorial policy. No 'maybe's' and 'allegedly' for him, only things in black and white.

As the US Fed tightens policy rates and the dollar gains against most currencies in the world, India's foreign exchange reserves dip and inflation shows little sign of easing as the festive season shopping has created renewed demand for product and services, comes the bad news that the Organization of Petroleum Exporting Countries (OPEC) and its allies will cut production by 2 million barrels a day in order to shore up falling prices. This means that global oil supply will reduce by 2%. Statements by OPEC officials suggest that the organization wants the price to rule at $90 per barrel from the $82 per barrel they were ruling in the last week of September after seeing highs of over $100 per barrel in June. The US media has termed OPEC's move as a failure of President Joe Biden's so-called fist-bump diplomacy with the Saudis and highlights the difficulty the US will face in managing the economy in times of a global recession risk as crude prices remain elevated. 

For India, especially, this is extremely bad news. The country imports more than 80 percent of its requirement and is under immense pressure as the rupee is falling to new lows against the dollar. Further, inflation is still very high. If India's crude basket once again rises to over $100 per barrel, there will be a cascading effect on prices will be upwardly revised and the chances of runaway inflation will loom large. India's crude import bill had been declining after June mainly due to lower prices and discounted imports from Russia. But Russian imports are a small percentage of the total requirement and if prices rise beyond $90 per barrel, as they did after the OPEC announcement, India will feel the pinch as there will be huge pressure on the current account deficit.

Although reports suggest that the US will ease sanctions on Venezuela and allow it to export oil to the US and European markets, that will not be enough to cool global crude prices. With prices expected to prevail over $90 per barrel in the medium term, India will have to battle inflationary pressures and the RBI will have to keep raising key interest rates. That, of course, will have an adverse effect on growth.