Oil Price Volatility and its Impact on the selected Economic Indicators in India

Abstract

Crude oil is the most widely used energy resource in the world and it accounts for nearly 40% of the global energy demand and its consumption is estimated to be over 85 million barrels per day. As India is one of the non-OPEC (Organization of the Petroleum Exporting Countries) countries it fulfills its domestic demand by way of import as India has a much lower level of production. Any slight fluctuation in the oil prices can have both direct and indirect influence on the economy of the country. This research paper aims to analyze the impact of oil price volatility on the selected economic indicators of India. Growth in GDP, employment, inflation, industry and business, trade etc is the various economic indicator of a country. For the purpose of this study, GDP, inflation and stock market (NSE) are analyzed to know the impact of oil price volatility on it for the period 2003 to 2013. It evaluates the GDP growth performance and assesses the historical trends of the CPI, NSE and oil price in India. The relationship among oil price, gross domestic product, NSE index and inflation is measured with the help of multiple regression models individually. The study has been made by taking GDP, NSE and CPI as dependent variables and oil price as an independent variable. It is found that there is significant positive relationship between oil price and inflation. Gross domestic product and stock market of India are also affected by the oil price.