Why Do Shakiras Fans Think a Jar of Jam Had Something to Do with Her Split from Gerard Piqué?
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What does the fall in crude oil price mean for Indias economy? (Part 10 of 12) ( Continued from Part 9 ) Trade balance Like other “balance” indicators, trade can either be in surplus or in deficit. A surplus occurs when exports are more than imports. A deficit occurs when the situation is reversed. In the following graph, the figures for fiscal year 2015 are for April–November 2014. India has been a net importer of goods and services for several decades—mainly because of imports’ high growth. Mineral oils and associated petroleum products commanded a lion’s share of imports. Crude oil forms a significant portion. To learn more about India’s trade and trading goods, refer to Why India’s trade balance impacts investors . Impact of price fall As you can see in the following graph, crude oil formed over 80% of petroleum imports by value for over ten years. In fiscal year 2014, April 2013–March 2014, crude oil formed 92.1% of all petroleum imports. This included petroleum products. During the year, India imported nearly 189,238 TMT (thousand metric tons) of crude oil. The CAGR (compound annual growth rate) for the import of crude, by volume, in the past five years was ~3.5%. If we consider a jump in consumption this year by 5%, at $110 per barrel, the import value of crude for fiscal year 2015 would have been ~$160 billion. If crude oil prices average $90 per barrel for fiscal year 2015, April 2014–March 2015, this value will come down to $131 billion. If prices average $80 per barrel for the period, the value will reduce to $116 billion. In the respective cases, the country’s savings is ~$30 billion and ~44 billion. The savings would reduce the trade deficit, all other things remaining constant. A reduction in either imports or trade balance doesn’t directly impact India-related ETFs—like the WisdomTree India Earnings Fund (EPI), the PowerShares India Portfolio (PIN), the iShares MSCI India ETF (INDA), the Vanguard FTSE Emerging Markets ETF (VWO), and the iShares MSCI Emerging Markets Index Fund (EEM). However, it reduces a lot of pressure on the government’s finances. It also improves India’s macro picture. Apart from macro indicators, there are other Indian entities that are impacted by the price fall. We’ll discuss these factors in the next part of this series. Continue to Part 11 Browse this series on Market Realist: Part 1 - Why did crude prices fall? Part 2 - Where does India’s oil industry stand? Part 3 - What products does India produce and consume? View comments
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