RBI sees price of India’s crude oil imports at $85 a barrel in 2024-25
Updated: Apr 5th, 2024
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| Source: IANS |
The RBI expects the price of the Indian basket of crude oil imports to be around $85 per barrel going ahead amid geopolitical tensions which have “imparted significant uncertainty” to the outlook.
India exports around 85% of its crude requirement, and soaring oil prices which have often crossed the $90 a barrel mark in recent years, tend to drag down the economy.
The RBI’s monetary policy report released today states that international crude prices exhibited sizeable two-way movements in the second half of 2023-24, falling in Oct-Dec 2023 to around $75 per barrel on slowing global demand amidst weak manufacturing activity and easing demand for transportation fuels as well as supply increases from non-OPEC countries.
However, amidst intensifying hostilities in the Middle East, deep output cuts by OPEC plus cartel, and incidents of supply outages, international crude prices moved higher from mid-December reaching an average close to $85 per barrel in March, the report points out.
“The spread between global petroleum product prices and crude prices eased from its recent peaks in mid-2022 but remains elevated by historical standards in view of demand-supply refinery mismatches. Taking into account these factors, the baseline assumption for the crude price (Indian basket) is retained at $85 per barrel,” the report states.
Regarding the outlook for the rupee, the report states that the nominal exchange rate of the Indian currency saw two-way movements in the range of ₹82.8-₹83.4 per US dollar in the second half of 2023-24. Taking into consideration the uncertainty around US dollar movements, the ebbs and flows of global capital flows and international crude oil prices, the baseline assumption for the exchange rate is revised to ₹83 per US dollar.
It also sees as a positive factor in the global growth forecast for 2024 being revised upwards by 20 bps to 3.1% by the International Monetary Fund (IMF) in its Jan 2024 update of the World Economic Outlook (WEO) from its Oct 2023 projection. Global economic growth is expected to increase marginally to 3.2% in 2025 and global trade growth (goods and services combined) is projected to accelerate from 0.4% in 2023 to 3.3% in 2024 and further to 3.6% in 2025.
However, the headwinds from protracted geopolitical tensions and increasing disruptions in trade routes pose risks to India’s growth outlook, according to the report.
Taking all these factors into consideration, India’s real GDP growth for 2024-25, is projected at 7.0%, with Q1 at 7.1%; Q2 at 6.9%; Q3 at 7.0%; and Q4 also at 7.0%. The risks are evenly balanced, the report adds.
(Source: IANS)
-Edited for style
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