The deal struck late last week between the major oil exporting countries to increase output is too ambiguous to offer relief to Indian policymakers. There were hopes that a firm commitment to increase crude oil production would lead to lower global prices—and thus less pressure on the Indian current account balance as well as on inflation.

The oil cartel has agreed to raise output but it is not clear by how much. There seems to be a deep divide between the group, with countries such as Iran, Iraq and Venezuela that are not in a position to increase crude oil exports right away arguing that lower prices will hurt their budgets. It remains to be seen how the commodity markets react in the coming days to what appears to be an ambiguous agreement.

Demand for fuel should continue to increase in tandem with global economic expansion, though the availability of alternatives such as shale oil should act as a cap on global crude oil prices. The strain on Indian macro indicators will continue as long as the global oil cartel plays hardball.