Ridding oil import dependence

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The second wave of coronavirus might prove to be deadlier than the first for India. The Indian economy is showing no new signs of revival at the current juncture. And whatever, recovery predictions were made will go for a toss with the second wave spreading so fast in the country. India’s GDP had shrunk by eight percent in 2020-21 as against a four percent growth in the previous fiscal. Unemployment at an all-time high, rising prices of essential commodities, falling economy; Covid-19 has wreaked havoc in the nation. To add to the list of worries, comes the increase in crude oil prices. With the Indian rupee falling constantly, the rise in crude oil prices might be the last nail in the coffin of Indian economy. Notably, the USA, India and China together account for nearly 45 per cent of the overall crude oil import. The oil market seems to be shaking off near-term demand concerns regarding the second wave of coronavirus and the easing in the global reflation trade. However, with the Indian economy not at its best and being beaten everyday a little more, by the rising infections in the nation; rising crude oil prices will only mean more disaster for the already limping economy. Only last month, oil briefly rallied toward USD 70 a barrel after OPEC+ chose not to relax supply curbs even as the global economy pulls out of its pandemic-driven slump. It confounded widespread expectations that the group would loosen the taps. The problem with India is that it further has to follow domestic system of levies on petro products by both the Union and states. This will further multiply the costs, thereby affecting the most to the end-user who are the citizens. Nearly 86% of India’s annual crude oil requirements are met through imports. In 2019-20, India imported almost 270 million tonnes of oil at a cost of USD 102.3 billion. The rising crude oil prices would raise India’s overall expenditure and lead to a higher fiscal deficit. Notably, soon after assuming office, Prime Minister Narendra Modi highlighted the aim of reducing India’s dependence on oil imports. With the crude oil prices going up, India must work together to lower its energy requirement which would give the ailing economy the required time to heal and return on track. It is high time the government and the officials formulate some concrete strategy to practically make the mission of reducing oil import dependence a reality. The increasing number of positive coronavirus cases is already a huge cause of concern for the country. And given the current trends, it seems that a lockdown is becoming inevitable for many states, New Delhi being the first to announce it officially. All eyes are now upon the Union government to steer the nation clear of the pandemic and economic crisis.

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