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Fueling the Economy



In the last quarter of 2014 Indian economy has seen a growth rate of 7.5 per cent year-on-year basis. This has made India the fastest growing economy in the world, surpassing China. In the last quarter of 2013 Indian economy grew at the rate of 5.5 per cent. There is clearly a jump of 2 per cent in the growth rate. This has been achieved at the the time when most of the economies of the world are seeing a downward trend in their growth rate.

A question arises what has actually changed in India that has made this achievement possible. Is it the change in the Government or the fall in the global crude oil prices?

In my view the role of the new government and the fall in the oil prices both are responsible for this. 

We all must have read or seen in the news that Global crude oil prices have decline from $110 per barrel to about $45 per barrel in less than six months time. What is the reason behind such a sudden decline!! I see three important reasons: 
  1. Fall in demand of crude oil globally: Due to the economic crisis of 2008.
  2. USA has started using its shale reserves to its fullest extent. Consequently less oil import from USA.
  3. The oil producing countries failed to cut down the production of the crude oil. Less demand and greater supply of oil has led to steep decline in the prices.
How India benefited?


  • Petroleum,Oil and,Lubricants (POL) is the largest item of import for the Indian economy. With the fall in crude oil prices India's import bill has reduced significantly. We have been able to save some precious dollars. The oil companies have passed the benefit to the citizens by reducing the petrol and diesel prices.Consequently the inflation has eased.
  • Government also managed to do some fiscal corrections by increasing the excise duty on the oil and utilizing the money to bridge the fiscal deficit. The current account deficit has significantly declined. The IMF and other global institutions have raised their predictions of the GDP growth rate of the Indian economy to nearly 8 per cent per annually.
What do we expect in the future?


In the future the crude oil price is likely to increase. But it will take time to reach the above $100 per barrel limit. India will continue to save precious dollars and in the future the rupee would appreciate in dollar terms.

Beginning of "Acche Din...!!"



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