Link between Rupee Dollar exchange and Oil prices

By
India is the 7th largest country with land mass of 3.30 Million Square Kms. and second largest
in population of over 1.2 Billion, accounts for 17.2% of world population. The country has to
produce about one Trillion worth of GDP to fulfill needs of its population. In order to produce
this one Trillion worth of output, India needs 2.5 Million of Barrels of oil per day which is 4.4%
of total world demand for oil.
This ever growing demand creates profound influence on growth and inflation levels in India.
International oil prices is to effect the domestic prices. The administered price mechanism had
shielded the country from impact of oil shocks.

CURRENT POSITION
Government of India has given up the administered price mechanism in oil sector and linked
oil prices in June 2010 and Diesel prices in Oct. 2014 with international oil prices. Oil prices
certainly affects Indian economy where US Dollars is the acceptable currency in international
market. The impact has been assumed with regard to exchange rate of Rupee and Dollar alone.
So, the impact assessment would be partial since oil prices can penetrate into other macro-
economic variables & all sectors of economy. Public sector oil companies and consumers shared
burden of oil price increase in the form of Inflation. Public sector companies are backed by the
Budgetary support by the Govt.The deregulation of all petroleum products except LPG cylinder
Kerosene, ultimate burden is shifted to People in the form of Taxes. Since energy is the driver of
economic growth, payments of oil covers up substantial portion of Foreign Exchange of oil
consuming countries.
 Under the present circumstances, Govt. should adopt two policies termed as Short and Long
 measures: 
 1) In short term, fuel prices should be covered by GST. Since the period left in current financial
     year is only 4 months away, economy will be able to manage with its sources which it has
     managed well by more tax, GST revenues.
2) In case of need, Govt. can launch and ease NRI investment schemes which can improve
     upon its CAD.
    As a  long term measure,
1) Govt. should prefer giving licences to industries whose products have good market for
    exports. It will supplement Foreign exchange reserves and will make Rupee stronger
    vis a vis Dollar.   
 2) Industries which make import substitutes for Indian market. This will reduce the demand
     for imported goods.in India.             

Comments

Post a Comment

Popular posts from this blog

Qualities Of A Good Prime Minister

By
Following are ten qualities (not in order of importance), which I believe are the most important for a Prime Minister and why ? - 1) Ability to connect with constituents - All great leaders in history had a penchant for being able to connect with their citizens i.e. a strong or habitual liking for something or tendency to do something. Leaders who have failed have probably failed in this domain. 2) Clarity of vision - The Prime Minister who knows their vision and can successfully articulate it to the voting public is one who will be held in high regard. 3) Coherent grasp of domestic issues - There has to be a keen desire and understanding of domestic concerns that directly impact the citizens. Failure to understand and address these issues will create a gap between what the Leader does and how it impacts their citizens. 4) Clear understanding of different cultures in their Governance - All good leaders will be able to understand the Political culture, Ethical/ Racial cultures, Cl
Read more

IMF suggestions for India Growth Rate

By
India's growth accelerated to 7.7.% in 4th quarter of 2017-18 (F.Y.) which was up from 7% in the previous quarter. In order to sustain the high growth rate, following three steps are suggested for India by IMF ( International Monetary Fund) to follow :- 1) To revive a Bank credit and enhance the credit provision by accelerating clean up of Bank and     Corporate Balance sheets & enhancing the growth of Public Sector Banks. 2) To continue fiscal consolidation and to lower elevated public Debt levels by simplifying &     streamlining the Goods and Service Tax (GST ) structure. 3) To renew impetus to reforms of key markets over the medium term, for example, Labor and     Land as well as improving the business climate to improving competitiveness and maintaining     the level of growth in India.  India's Gross Domestic Product (GDP) is poised to grow by 7.3.% in 2018-19 and 7.5% in 2019-20  on strengthening of Investment and private consumption.  Govt. is stead
Read more

Working Of Nuclear Plant and Generation Of Energy

By
Nuclear energy originates from splitting of Uranium atoms- a process called fission. This generates heat to produce steam, which is used by Turbine generator to generate electricity, because Nuclear power plants do not burn fuel, they do not produce greenhouse gas emissions. It is the safe, clean, cost effective alternative contrary to claims by opponents of nuclear energy. Nuclear power reactors use controlled nuclear fission in a chain reaction. With the use of neutron absorbers, the rate of reaction controlled, so the power depends on demand. By reliably providing power 24 hours a day, Nuclear energy is an important part of the energy mix necessary to meet electricity demand. And, with no carbon emissions, it will remain an important clean energy resource for the future. For more than forty years, Duke Energy, USA has operated nuclear plants- setting industry benchmarks for safety and efficiency in the process. Working of a Nuclear Plant - A Nuclear power plant works much like a
Read more

Artificial Intelligence on Business Forecasting

By
The business world today is driven by customer demand. Unfortunately, the demand patterns vary considerably from time to time. That is why it can be so challenging to develop accurate forecasts. The goals of forecasting are to reduce uncertainty & provide benchmarks for monitoring actual performance. A new generation of Artificial Intelligence technologies have emerged that hold significant commitment on improving forecasting process including applications as product demand, employee turnover, cash flow, distribution requirements, manpower forecasting & inventory. Artificial Intelligence systems are designed to bridge the gap between the two traditional forecasting approaches - Managerial and Quantitative. Artificial Intelligence is defined as a Computer Based analytical process exhibiting actions and behavior considered ' Intelligent' by human observers. A.I. attempts to mimic human thought process including reasoning and optimization. One purpose of A.I. is
Read more

FDI - Foreign Direct Investment- Types And Essentials

By
FDI started in India in 1991 in wake of economic crisis and since then it has steadily increased. It is an investment made by an individual or firm in one country into business interest located in another country. Besides being a critical driver of economic growth, FDI is a major source of Non-Debt financial resource for the Economic Development of India. Foreign companies invest in India to take advantage of relatively lower wages, special investment privileges (Tax exemptions) etc for a country where foreign investments are being made. It also means achieving technical know-how and generating employment. The India Govt's favorable policy regime and robust business environment have ensured that foreign capital keeps flowing into the country to improve in view of ease of doing business and relaxation in FDI norms is yielding results. FDI equity inflows in India was US $44.37 billion in 2018-19 mainly on account of Service Sector, Computer hardware and software, Trading, Telecomm
Read more

Satellite Prediction Of Floods In India

By
Floods are one of the most devastating and costly national disasters each year affecting on an average 96.9 million people worldwide and causing $13.7 Billion in damages according to U.N. Office for Disaster Risk Reduction. They wash away or destroy Homes, Pollute Drinking Water and a source to giving birth to water borne diseases. The Indian sub-continent is one of the most affected due to chronic flood events mostly induced by periodic monsoon rainfall. The North - Eastern state of Assam has a complex fluvial systems of rivers, mainly with two inter connected rivers of Brahmaputra and Barak which together enter Bay of Bengal. Due to enormous sediment transport from the upper catchment areas and subsequent lack of carrying capacity of the channels in these two river valleys, flooding is a periodic phenomenon every year during the peak monsoon months from June to Sept. causing extensive damages to life and property. Satellite plays important role in detection and monitoring of flo
Read more

Tools To Measure Economic Progress Of A Country

By
Economic growth is the increase in the Inflation- adjusted market value of Goods and Services produced by an economy over time. It is conventionally measured as the percentage of increase in Real Gross Domestic Product (GDP). Economic reports and indicators provide measurements for evaluating health of our economy, latest business cycles and how customers are spending and generally faring. Given below are Nine points common and vital economic indicators for experts to judge and draw opinions from: 1) M2 (Money Supply) - Does not include Institutional Money Fund Assets, large denominated Time Deposits or Special Reserves Banks required to make. Data released by Reserve Federal System is used to assess current economic and financial conditions and to help alter its Monetary Policy which includes raising and lower interest rates. 2) Real GDP (Gross Domestic Product) -  Real GDP is a comprehensive way to gauge the health and well-being of an economy.It is the market value of all goods
Read more

US Dollar - Effects in the modern economy

By
U.S. dollar is strongest currency which supports U.S. economy. The reason is that more than one -third countries of the world's gross domestic product comes from countries that peg their currencies to dollars. A strong economy will attract investment from all over the world due to perceived safety and ability to achieve return on investment. Since investors seek higher yield on investment particularly from abroad, creates a strong capital account and high demand for dollars. Economic losses of World War have resulted into destruction of capital, trade, human suffering, spread of diseases, displacement of people and destruction of environment among others. Bretton Woods system In the post war scenario, need was felt to have a system to control value of money between different countries. It means that each country had to have a monetary policy that kept exchange rate of its currency within a fixed value - plus or minus one percent - in terms of Gold.This system was agreed upon
Read more

Economy of UAE

By
UAE consists of seven Emirates founded and declared their independence from Britain on 2nd December, 1971 as a federation. Six of the emirates, i.e. Abu Dhabi, Dubai, Sharjah, Ajman, Fujairah & Umm Al Quwain combined on that date. Ras Al Khaimah joined on 10th February, 1972. The total population of seven emirates is 8.3 million ( 38% live in Abu Dhabi, 30% in Dubai, rest in other  areas of Emirates). UAE has never been a British colony but have come under British protection. For centuries, region was involved in rival ties between local Emirs on Land and Pirates on sea. Britain began attacking pirates to protect its trade with India. This led to ties with the Heads of the areas which continued  till 1971 when agreement was terminated. It was due to Britain's imperial overreach exhausted politically and bankrupt financially, Britain decided to abandon thee states. UAE became member of Arab league and member of United Nations in 1971.The country is also a member of OPEC and
Read more

Devaluation and causes for Foreign Exchange rates variation

By
  Indian Rupee and Devaluation  Indian Rupee was settled at Rs.13/- per pound and dollar @ Re.1/-  in 1947 after partition. It continued up to 1966 when first devaluation took place. This was carried out since Govt, was consistently facing balance of payment deficit since 1950 and failure of Govt. efforts to revive and have positive trade balance Moreover, war with Pak in 1965 and cutting off of foreign aid by USA and other countries fueled the crisis.Rise in fuel prices all around did put pressure on inflation as well.  In 1991, second devaluation took place due to downward pressure on Indian Rupee from international markets. It was a part of Economic reforms.The restrictions were relaxed on imported capital goods. Import Export policy replaced import quotas with tariffs causing major overhaul of trade policy Devaluation is undertaken as a means of correcting deficit in balance of payments.        Foreign Exchange variations and causes Foreign Exchange is one of the most impo
Read more