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While the World Skids on Plummeting Oil, India can stay firm, Smoothening Growth Propspects

Crude is plummeting on account of weak global demand, sending waves of shock across Russia, Iran and Venezuela etc. as these countries run their economies on Oil trade. The conditions are perfect for countries like India and China who are dependent on oil imports and the kind of fall in prices make them smile with their cash chest relatively looking better.

The seeds of the supply shock were planted a little more than a decade ago in north Texas when U.S. companies pioneered horizontal drilling techniques combined with hydraulic fracturing technology. The result: wringing oil and gas out of rocks previously thought to be unworkable.

This Shale technology discreetly developed by US has been kept under wraps for initial few years, which has made them to move ahead on their energy sustenance leaving the rest of world to eat their fingers.

This can damage Russia’s economy badly not to mention about Venezuela which is in a precarious state, if the price of Oil stays at around $80 for a prolonged period. This can be a kind of geo political war as few of the Opec countries are supporting the cause by keeping the prices low leaving others within the group high and dry.

Oil can help Russia to get marginalized for which Europe or OPEC is not going to complain. It is going to be interesting as the global economies will go through varying fortunes on account of the new situation. The world will love to have Oil at above $85 to avoid any disruptions. All will depend on how the US who are the clear winner of the situation plan his shale output and OPEC’s strategy on curtailing production.

Back to India nothing can be better for Modi than the given situation. The government balance sheet should look better with lower oil liability and deregulated fuel prices. Modi and Rajan, the Governor of the Apex Bank can have their task cut out for “Make In India” project to become successful as they can leverage on import of technology to revive Indian Manufacturing which is under doldrums due to policy paralysis.

It has been a while since Modi took over, but nothing much has happened on the policy side. Though the belief on Modi’s deliverables is strong and intact among business community and people at large, there is a bit of restlessness creeping in as the days pass by. The fiscal is improving and inflation is loosening out. You can’t expect more than this for the government to step up growth process.

Geopolitics and Local elections are dampeners. These are taking the Prime Ministers focus away from the growth agenda. Sooner he gets back to the core it is better.