Oil price recovery

India has been a major beneficiary of the collapse in global oil prices and thus must pay attention to the sudden surge


The sudden recovery in global oil prices in recent weeks deserves attention. India has been a major beneficiary of the collapse in global oil prices since end-2014. Lower energy prices have helped bring down inflation, the current account deficit and the subsidy bill. Indian policymakers have also worked hard to rebuild economic stability, but few can deny that lower oil prices helped.

Banker Uday Kotak tweeted last week that India’s honeymoon with inflation and the current account may be over. He added that corporate performance has to improve faster as macro tailwinds slow down. The latest corporate results show that lower input prices are finally making an impact through higher operating margins for many companies. It is hard to disagree with Kotak’s warning, even if it is not quite clear whether the current recovery in global oil prices is anything more than a temporary dead-cat bounce.