Declining crude oil prices and its implications on the indian economy

The following research paper aims to study the implications of oil prices on the Indian economy especially the impact of declining prices. Oil prices are highly important for the economy especially a developing country like India. India is the 3rd largest energy and oil consumer in the world after China and the US. Oil is a factor that helps an economy to move forward and achieve high levels of growth. The research paper studies the oil production and the supply of oil. This paper has tried to estimate using various tools a correlation between oil prices and various economic and market factors. The paper studies the impact on various leading and lagging indicators in the economy that help give an idea about the implications of declining oil price on the economy. This research entails a study of economic factors like inflation, GDP, the impact on foreign reserves, etc. India depends highly on oil imports and thus an intensive study is required to understand the impact of the oil prices. Major imports for India come from Iraq and Saudi Arabia and the demand for oil in India is on the rise with every coming year. This Research has helped us conclude that Oil prices have an inverse relation with stock prices which means declining oil process have a positive impact on the stock prices and thus the economy. It is observed statistically that the role of inflation is significant in declining GDP growth of Indian economy. The two variables of oil prices and GDP of India are negatively correlated. This can explained by the fact that increase in oil prices lead to greater inflation, lower profits of firms, lower tax revenues for the government, higher current account deficit and dampened investor sentiment. All this factors restrict the economy from growing at its full potential.