Contrary to popular perception, crude oil prices are positively correlated with India's real GDP growth
The massive 35% year-to-date decline in global crude oil prices to a five-year low of $70 a barrel has given additional impetus to the market, which has already been running on high octane. The general line of argument is familiar: lower crude price will reduce inflation, imports, oil subsidy, fiscal deficit and interest rates. This, in turn, is seen to boost corporate earnings and market rating. Underlying these presumption is an inverse correlation between crude prices and India’s gross domestic product (GDP) growth and corporate earnings. But the facts are quite the opposite!