Breathing space: on the strengthening rupee

 

 

Breathing space: on the strengthening rupee

Fall in oil prices gives the rupee and the Indian economy a much-needed boost
After falling consistently(लगातार) against the U.S. dollar for most of this year, the rupee has managed(कामयाब/व्यवस्थित) to gain(वृद्धि/मुनाफ़ा) some ground over the last few weeks. It has gained almost 5% from its lowest levels reached in October. The fortunes(भाग्य/संपत्ति) of the rupee, which even after the recent appreciation(सराहना/प्रशंसा) is down about 11% since the beginning of the year, have been tightly linked to the price of crude oil(कच्चा तेल) in the global markets. This is no surprise since imported oil meets about 80% of India’s total demand. The value of the rupee tanked amid the uptrend(तेजी को बल) in oil prices this year which lasted till early October. Since then, the rupee has gained against the dollar in tandem(मिलकर) with the fall in global crude prices. Brent Crude has dropped by a massive(बड़ा/व्यापक) 30% since early October, when a barrel cost around $86, to around $60 today. This sharp fall has been the result of a dramatic(आकस्मिक) change in mood in the oil market. Investors(निवेशक) until a few weeks ago were worried about the lack of sufficient(उचित/पर्याप्त) supply in the market due to disruptions(अवरोधों/व्यवधान) in arrivals(आगमन) from major producers such as Iran and Venezuela. Now, however, the markets are worried about possible oversupply as the U.S. has softened its stance against Iran and turned into the largest crude oil producer in the world with the boom(उछाल/तेजी) in shale production. Worries about a drop in global demand due to faltering(कमी/हीनता) growth in major economies like China may have also contributed(योगदान) to the fall in prices.

The fall in global crude oil prices comes as a big relief to the Central government, which has faced increasing(बढ़ाना) macroeconomic and political pressure(राजनीतिक दबाव) due to rising prices. According to UBS, a drop of $10 in the price of oil can improve India’s current account and fiscal(वित्तीय) deficits(अभाव) by 0.5% and 0.1% of GDP, respectively(क्रमानुसार). The ruling party may be pleased with falling oil prices in the run-up to the general elections next year. Fuel prices across major Indian cities have fallen significantly(काफी/महत्व के साथ) in the last few weeks. The Reserve Bank of India will be relieved(कार्य मुक्त/सहायता देना) as it will have to worry less about the rupee and oil-induced inflation(मुद्राप्रसार). Foreign investors, who have been net sellers this year, have turned net buyers this month. This points to an increase in investor confidence(आत्मविश्वास) in the economy as the fundamentals improve. But amid rising global uncertainties(अनिश्चितताओं/संदेह), it may not be so easy to map what lies ahead for global crude oil prices and the rupee. The December 6 meeting of the Organisation of the Petroleum Exporting (निर्यात) Countries will make clear the response of oil producers to the sharp(तेज) fall in prices. Shale companies are also likely to respond to falling prices by cutting production; the profit break-even point for shale producers, however, is anyone’s guess. India should capitalise on the relief offered by the fall in oil prices to improve its preparedness(तत्परता /मुस्तैद) for any future jump in oil prices.

 

Important Vocabulary

1.Appreciation(सराहना/प्रशंसा)
Synonyms: acknowledgment, gratitude, recognition, thanks, gratefulness
Antonyms: criticism, decrease, depreciation, disparagement, disregard

2.Consistently(लगातार) ,
Synonyms: always, constantly, frequently, normally, persistently
Antonyms: never

3.Gain(वृद्धि/मुनाफ़ा)
Synonyms: achievement, advance, advantage, benefit, boost

4.Tandem(मिलकर)
Synonyms: club, company, lineup, organization, party
Antonyms: individual, one, single, teammate

5.Disruptions(अवरोधों/व्यवधान)
Synonyms: interruption, break, separation, severance, splitting

6.Faltering(कमी/हीनता)
Synonyms: flounder, hesitate, reel, waver, wobble,
Antonyms: calm, hold, remain, stabilize, stay

7.Deficits(अभाव)
Synonyms: loss, shortfall, arrears, defalcation, default
Antonyms: abundance, adequacy, advantage, enough, perfection

8.Relieved(कार्य मुक्त/सहायता देना
Synonyms: reassured, relaxed, satisfied, allayed, alleviated
Antonyms: distraught, sad, worried

9.Confidence(आत्मविश्वास)
Synonyms: assurance, certainty, courage, determination, morale
Antonyms: doubt,fear, hesitation, irresolution, uncertainty

10.Sharp(तेज)
Synonyms: acute, pointed, razor-sharp, sharpened, stinging
Antonyms: blunt, dull, aboveboard, benevolent, bland

11.Preparedness(तत्परता /मुस्तैद)
Synonyms: alertness, mobility, preparation, willingness, zeal

12.Significantly(काफी/महत्व के साथ
Synonyms: automatically, naturally, no doubt, undoubtedly, unquestionably
Antonyms: doubtfully, questionably, unnecessarily

 

 

 

Credit To The Hindu News Paper

Fall in oil prices gives the rupee and the Indian economy a much-needed boost
After falling consistently against the U.S. dollar for most of this year, the rupee has managed to gain some ground over the last few weeks. It has gained almost 5% from its lowest levels reached in October. The fortunes of the rupee, which even after the recent appreciation is down about 11% since the beginning of the year, have been tightly linked to the price of crude oil in the global markets. This is no surprise since imported oil meets about 80% of India’s total demand. The value of the rupee tanked amid the uptrend in oil prices this year which lasted till early October. Since then, the rupee has gained against the dollar in tandem with the fall in global crude prices. Brent Crude has dropped by a massive 30% since early October, when a barrel cost around $86, to around $60 today. This sharp fall has been the result of a dramatic change in mood in the oil market. Investors until a few weeks ago were worried about the lack of sufficient supply in the market due to disruptions in arrivals from major producers such as Iran and Venezuela. Now, however, the markets are worried about possible oversupply as the U.S. has softened its stance against Iran and turned into the largest crude oil producer in the world with the boom in shale production. Worries about a drop in global demand due to faltering growth in major economies like China may have also contributed to the fall in prices.

The fall in global crude oil prices comes as a big relief to the Central government, which has faced increasing macroeconomic and political pressure due to rising prices. According to UBS, a drop of $10 in the price of oil can improve India’s current account and fiscal deficits by 0.5% and 0.1% of GDP, respectively. The ruling party may be pleased with falling oil prices in the run-up to the general elections next year. Fuel prices across major Indian cities have fallen significantly in the last few weeks. The Reserve Bank of India will be relieved as it will have to worry less about the rupee and oil-induced inflation. Foreign investors, who have been net sellers this year, have turned net buyers this month. This points to an increase in investor confidence in the economy as the fundamentals improve. But amid rising global uncertainties, it may not be so easy to map what lies ahead for global crude oil prices and the rupee. The December 6 meeting of the Organisation of the Petroleum Exporting Countries will make clear the response of oil producers to the sharp fall in prices. Shale companies are also likely to respond to falling prices by cutting production; the profit break-even point for shale producers, however, is anyone’s guess. India should capitalise on the relief offered by the fall in oil prices to improve its preparedness for any future jump in oil prices.

Print Friendly, PDF & Email