As crude oil prices touch a 7-month high of $50 a barrel, Finance Minister Arun Jaitley said India can handle the current level but higher rates will impact the economy and lead to inflationary pressure.
"Obviously higher crude price is not good news for India. But if it remains within a range, as it is at present, it is something that can be handled. If it goes beyond the range, then certainly it creates an adversity," said Jaitley during his six-day trip to Japan. Petrol prices have been raised five times since March, rounding up Rs 8.99 a litre, while diesel prices have been raised by Rs 9.79 per litre. Every rupee per litre increase in petrol price leads to 0.02 per cent rise in WPI inflation and by 0.07 per cent for the same amount of increase in diesel rates.
"India being a net buyer has benefited from the regime in last over a year. And if the prices remain within the current range we have the ability to absorb although if there is any undue increase in prices, its impact on both inflation and savings would be noticeable," Jaitley said. He said the government "will have to deal with the situation if it arises." When oil prices slumped in second half of 2014 and 2015, the government hiked excise duty on petrol and diesel nine times to mop up additional revenues that helped it meet its revenue and fiscal deficit targets. In all, it raised excise duty on petrol by Rs 11.77 a litre and that on diesel by Rs 13.47. Jaitley said the global environment has certainly not been helpful for growth of Indian economy.
"In many ways it has also been obstructive. I say obstructive because there is lot more volatility today, lot more unpredicability today and more than that I think the shrinkage on global trade has impacted on all economies and therefore it has impacted on us." In a helpful global environment for an economy to grow much faster, at 8-9 per cent, is reasonably possible but when the global environment is much adverse, to then maintain a 7.6 per cent growth rate is extremely critical, he said. "Once the growth returns to the world, I think this 7.6 per cent, we have a reason to look forward to, to enhance."
