InvestorQ : Will India really benefit from weak oil prices or will the slowdown hit the Indian economy?
prachi Patwardhan made post

Will India really benefit from weak oil prices or will the slowdown hit the Indian economy?

Answer
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1 year ago
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While the Indian economy will certainly benefit from the windfall gains of lower oil prices and lower import bills, there are some additional points to understand.

· Clearly, lower Brent prices will reduce the import bill of India and therefore the current account deficit by a big margin. This will also reduce pressure on CPI inflation.

· The government has the option to increase excise duty on petroleum to earn additional revenues. However, imposing higher taxes in a slowdown could be risky.

· Oil companies are among the highest dividend payers and this could lower dividends. Already refining companies could get hit on lower inventory valuations.

· An important point is that Indians employed abroad could see impact on earnings. This will impact remittances from the Middle East countries that are oil-based.

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