Impact of oil price fluctuations on macroeconomic variables in India in the post liberalisation period

Abstract

The study analyzed the impact of oil price fluctuations on macroeconomic variables in India during the post liberalisation period (1990 2022), highlighting the profound effects of oil price changes on the economy. It reveals significant fluctuations in oil consumption and production due to global and domestic factors. Crude oil prices peaked at $111.89 per barrel in 2011-12 before falling to $46.17 in 2015-16, leading to varied consumption patterns. LPG and High-Speed Diesel Oil (HSDO) grew robustly, while naphtha declined. Sectoral analysis shows increased oil consumption in transport and petrochemicals, with declining oil intensity per GDP unit due to improved energy efficiency. While higher oil intensity marginally influenced the Wholesale Price Index (WPI), its impact on GDP was insignificant. Oil prices significantly affect WPI in the short term and demonstrate long-term inter-dependencies with GDP and WPI. Additionally, crude oil import bills significantly affect India s current account deficit (CAD), emphasizing the need for strategic policies to manage oil price volatility. newline