Sharp drop in gold & oil prices brings cheer for Modi govt; public investments may rise too

July 27, 2015:The rainfall has just been 5% short this season, nearly the same as forecasted. Moreover, Gold and Oil prices have also fallen. So for this season it is most likely for the businessmen and consumers to have a sigh of relief.


Oil and Gold are the two biggest imports of India. Crude oil prices are down 15% in the past month and are being traded at half the price as compared to last year. 


Drop in Fuel and Gold Prices


Gold is continuing at a multi-year low. The forecasts show that for the current year the chain will not be broken. With the festive season coming to India will some serious investment.


The current scenario will not result into turbocharge for the Indian economy, but it will reap some benefits. The business will be free from the fear of rising interest rates and would have a healthy demand and profits. 


According to Jyotinder Kaur, Principal Economist, HDFC Bank, India was fortunate that global prices of commodities, particularly Crude Oil, had fallen. "This has provided a buffer to us and will help keep headline inflation below the near-term target of 6% set by the RBI.


This will, needless to say, provide comfort to Governor Raghuram Rajan in his deliberations about the future course of monetary policy," she said.


The government is also likely to raise money from the disinvestment of 10 companies which include MMTC, NMDC, etc. The downfall in the oil prices will deduct the borrowings of refiners. "This, along with the policy reforms augurs well for the sector, and will help the government get good valuations if it goes ahead with divestment in these companies," said K Ravichandran, Senior Vice-President and Co-Head, Corporate Ratings, ICRA.