Oil Crisis - The Positive Side

The continuous rise in the oil prices is adversely affecting the budgets of the household and the manufacturing units directly and indirectly. When the oil prices go up the cost of other related things also move up. Thus, the government is worried about the impact it would have on the economy of the country. On one hand it is cutting on the import duty while on the other hand it is writing to the State governments to reduce the sale tax so as to soften the impact of price rise.

But as they say, ‘Every cloud has a silver lining’.

Since decades it’s been a proven fact that when the sectors having lower oil requirements grow (service sector as against manufacturing), it gives the economy a push towards development. Thus, with the price hike the tertiary sector in India is expanding manifolds.

Keeping in mind the profit motive, the producer is always adjusting according to the price situation. No later they’ll switch from the high price oil to other cheaper fuels like energy from the sun, water etc, leading to economic prosperity.

The consumption of oil in the Indian economy is less than its industrial competitors. The oil consumption per dollar of national income is less in India as compared to other countries.

Therefore, India would be less affected by the mounting prices.

The oil producing countries are set to have an enormous inflow of income through their export bill and with a large number of Indians working there a part of this income is bound to be remitted to India. Thus, higher levels of foreign investment can flow into the share market.

In the decades when dollar was a rising currency, the oil exporting countries invested their petrodollars in the US. But now when dollar is on a decline and technological innovations in the US are at a standstill, the world research and development is moving to India looking for the services of less expensive scientists and engineers. Thus, India stands a good chance to attract this petrodollar flow.

But it would be unintelligent to again use up this increased forex reserves to pay for oil import. Thus, the right way must be on to promote fuel conservation and other cheaper forms of energy.

The spotlight should be on the opportunities the oil price is opening for us and not wait for the time when the prices would fall. As they say, buy the raincoat before the monsoons; do not wait for the monsoons.