Benefit from low crude oil price may not help India

Incremental benefit from low prices will not be significant for India in 2016, according to DBS Group.

“Going forward, the incremental boost will be more limited. Firstly, while the fall in crude prices has halved the oil import bill, exports have also fared poorly, down 18 per cent so far this fiscal year,” said DBS.

It said that higher weight of commodities in India’s export basket has hurt earnings in recent months. Shipments to the oil-producing economies have also taken a hit.

A fifth of India’s exports go to Opec countries. Shipments to the bloc fell by 3.3 per cent in the April-November period, compared to growth of five per cent in the year before. In particular, exports to the UAE are down by 10 per cent and to Saudi Arabia by 48 per cent. Russia is a smaller trading partner, but exports there are down by 26 per cent.

Tough economic conditions in oil-producing Gulf economies threaten to slow inward remittances, said DBS.

This has been a key support for India’s current account balance. India emerged as the world’s highest remittance recipient last year, with inflows worth $70 billion.