Wednesday, August 06, 2008

Oil Killing India's Economy

Rhys Blakely in Bombay : In the shorter term India must pray that the global oil market subsides. The country imports 70 per cent of the oil it uses and heavily subsidises domestic fuel prices to keep them within reach of its vast poor population.

“Given the inflation challenge, the fiscal and current account position, one might say oil prices are the most critical thing for India in the next six months or so,” Mr O'Neill said.


The rise of India's economy is often compared to the progress of an elephant - slow and plodding when compared with the dragon of China, but invested with a heavy sense of inevitability. In the past six months, however, the elephant has performed a disconcerting about-turn.


In January India appeared to be in excellent shape. Annual GDP growth was close to 9 per cent, corporate profitability had risen by 20 per cent in a year and the stock market had surged 50 per cent. The elephant was trundling along at full speed.


Seven months later, Bombay's benchmark Sensex index has lost 40 per cent of its value and foreign investors are fleeing the market.

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