Effect of crude oil price changes on macro economy and capital market of India

Abstract

Oil symbolizes an important role in the global economy. Crude oil or petroleum is an indispensable and a contributing factor for any economy. Several international crude oil price benchmarks (Brent, WTI, OPEC and so on) have always been tested through empirical studies to established certain cause-effect newlinerelationship and to determine their predictability. However, literature evidence is limited to Indian basket. Moreover, the need for forecasting this benchmark has newlinenot been acknowledged by the scholars. International crude oil price of Indian newlinebasket, also termed as Indian basket crude oil price, is the base of any petroleum newlineproduct pricing in India. Importing crude oil enhance the trade deficit of the nation. The present scenario of the global petroleum industry and the relationship among the major oil-producing and exporting countries are vulnerable. This situation increases the supply-side risk for the major oil-importing countries like India. In this state of affairs, it is vital to find out the factors that influence this price benchmark to reduce uncertainty. This research work aims to provide a holistic picture of the international crude oil price of Indian basket, considering the present scenario of the oil industry and lack of scholarly work on this field. Where on one side, the external factors affecting crude oil price has been determined, on the other hand how Indian economy and capital market is affected newlineby this price change have been found out. Triangulation method under a mixed approach has been adopted for this research work where quantitative and qualitative data collection have been run simultaneously. The time frame of the quantitative data collection is April, 2000 to March, 2018 and the frequency is newlinemonthly. Twenty experts have been interviewed to capture the qualitative aspects associated with the models. Four models have been proposed to execute the objectives.