The effect of skyrocketing crude oil prices can affect us the most. The price of Brent crude has jumped about 3 percent to reach $105 per barrel. According to the report of the research firm, the continuous increase in the prices of crude oil and food items will have a bad effect on the economies of Asia. Rising inflation, weak current account, rising deficit and impact of economic growth will make the problem worse.
GDP growth will be affected
The report said that India, Thailand and the Philippines will suffer the most in this situation. Whereas, Indonesia will benefit relatively. Being a pure oil importer, India will also suffer a lot because of the continuous increase in oil prices. “The rise in crude oil prices will have a severe impact on consumers and businesses,” the report said. We estimate that for every 10 per cent jump in oil prices, there will be a decline of about 0.20 percentage points in GDP growth.
inflation will increase
According to QuantEco Research, a $10 per liter increase in India’s crude basket could reduce the annual GDP growth forecast for FY22 by 10 basis points from 9.2 per cent. Madan Sabnavis, Chief Economist, Bank of Baroda, said a permanent rise of 10 per cent in the crude basket could push up WPI-based inflation by 1.2 per cent and CPI-based inflation by 0.3 to 0.4 per cent.
RBI will have to take measures to control inflation
Nomura said that after the recent Monetary Policy Committee meeting, RBI Governor Shaktikanta Das had said that inflation is expected to be 4.5 per cent in FY2023. But in the absence of current geopolitical tensions, the RBI did not foresee the risk of inflation going up in the coming months. Now RBI may have to take some big decisions to control inflation.
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