Markets are extremly volatile ahead of decision on oil prices in India (I guess by today evening there will be some news), I wonder if the Government agrees to increase Oil prices given the crude level heating everyday.
I heard a Fund manager, and his views were real eye opener when he started with the current situation which will only be worsen if nothing is done any soon. He proposed these three points to help Oil biggies, and help them not loosing single penny in coming days -
1. Rise in petrol prices upto 50% (Current fair price is 78 INR / L – with Crude at $135)
2. LPG prices should be doubled
3. Kerosene Oil / its derivatives should see a 3.0-3.5 times rise from current levels.
If Government takes any steps to increase prices of these commodities, Inflation will rise exponentially, which will force RBI to hike CRR further, and India’s 8% growth story will become a dream. However, there is a section of people who have the view that crude might come down to $90 levels by the end of Fiscal 2008, which seems impossible (my personal opinion), given Olympics in China – Oil demand will be huge, and China has recently increased its stake in Oil consumption biggies after the US. (US consumes 25% of each 100 barrel of Crude)
India had a good growth story in 2007, however, the Government of our country has a bigger role when it comes to the factors which will hamper our growth – we all know growth has a direct correlation with employement in any nation. Given we have a huge population, which is increasing at a faster rate (faster than 7% growth ateast), at this growth rate, we will be having a huge number of unemployed youth in next few years.
No offense to PM, but he is taking India no where, lets summarize this month’s events
- Rs 2 hike in petrol
- Farmer loan waiver – 71,000 Cr
- China relief package – 1 billion (proposed)
We are sitting on 4% Fiscal deficit, Crude price will make the deficit even more, and we will be helping China with another billion, when it is known that China has recently increased its Oil consumption – for its new Navy troops? My personal opinion is China has become a big threat to south Asian countries, and its rising Oil consumption and increased Capital infusion in Navy have created imbalance in the region.
The Oil Secy has proposed 10 Rs rise in petrol, which is minimum to save Oil biggies, it gives me shiver when I think, IOC, HPCL, BPCL will shut down petrol pumps in metros next month, if this continues.
Vivek Misra
Nice blog.Keep up with the good work!