Rising crude oil, coal prices expose India to macro risks says Morgan Stanley | India may face a big risk, rising oil and coal prices may worsen the economy

Rising crude oil, coal prices expose India to macro risks says Morgan Stanley- India TV Paisa

Rising crude oil, coal prices expose India to macro risks says Morgan Stanley

New Delhi. Global brokerage house Morgan Stanley has warned that rising energy commodity prices could pose risks to India on the macro-economic front. This includes inflation and economic growth. In this inflation rate is already high. A foreign brokerage company said this on Thursday. Analysts at Morgan Stanley said oil prices were up 14 percent to $83 a barrel and coal prices were up 15 percent to $200 a tonne.

Morgan Stanley said growth in energy prices, especially in the case of oil, and high inflation are fueling concerns about slowing growth. At the same time, it has also increased the fear that perhaps due to this monetary policy could be tightened. Analysts said there is a risk of further escalation of inflation and growth will improve only at the two-year compound annual growth rate, which will bring policy back to normal levels. After staying below the five per cent level over the next few months, inflation will move to 5.5 per cent by the quarter ending March 2022 and continued growth in energy prices, especially in oil, poses a risk of further inflation, he said.

A 10 percent increase in oil prices could lead to a 0.40 percent increase in CPI (Consumer Price Index) inflation. Since India imports 80 per cent of its oil demand, a 10 per cent increase in oil prices could widen the current account deficit (CAD) to 0.30 per cent of GDP. However, good exports will ensure that the current account gap is limited to one per cent in FY 2021-22, the agency said.

The Reserve Bank has projected CPI inflation at 5.7 per cent during 2021-22. CPI inflation for the first quarter of 2022-23 is projected at 5.2 per cent. In its last monetary policy review meeting, RBI has kept key policy rates unchanged to support the market. Morgan Stanley has said that the RBI may increase the repo rate in February next year.

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