Spike in global oil price poses risk for growth: Economic Survey

New Delhi: It is not just demonetisation which is threatening the world's fastest growing economy tag of India. A spike in oil prices too may have dampening impact on the growth, the Economic Survey said today.

India did not fully pass on the slump in oil prices in late 2014 and early 2015, resulting in it gaining the dubious distinction of having highest tax on diesel and petrol in all countries outside Europe.

"International oil prices have stopped falling, providing less of an updraft to the economy. So growth would have inevitably differed, even without demonetisation," the pre- Budget Survey tabled in Parliament said.

Price of basket of crude oil India buys has increased from USD 39.9 in April 2016 to USD 52.7 in December 2016.

It estimated that "oil prices could rise by as much as one-sixth over the 2016-17 level, which could have some dampening impact on the growth."

"Geopolitics could take oil prices up further than forecast. The ability of shale oil production to respond quickly should contain the risks of a sharp increase, but even if prices rose merely to USD 60-65 per barrel the Indian economy would nonetheless be affected by way of reduced consumption; less room for public investment; and lower corporate margins, further denting private investment," it said.

Also, the scope for monetary easing might also narrow, if higher oil prices stoked inflationary pressure.

The Survey projected a growth rate of 6.75-7.5 percent for 2017-18 fiscal.

It said since June 2014 when international oil prices started declining, India has increased its excise duties from Rs 15.5 per litre to Rs 22.7 per litre as of December for petrol and from Rs 5.8 per litre to Rs 19.7/litre for diesel.

The increase in petrol tax has been over 150 percent in India, it said, adding the governments of most advanced countries have simply passed on the benefits to consumers.

"As a result, India now outperforms all the countries except those in Europe in terms of tax on petrol and diesel," it said.

Tax on diesel in India at USD 0.38 per litre is higher than USD 0.14 in US, USD 0.28 in China, USD 0.35 in Japan but lower than USD 0.75 in France, USD 0.69 in Germany and USD 0.97 in UK.

Similarly, the USD 0.53 per litre tax on petrol is higher than USD 0.12 of US, USD 0.34 of China, USD 0.29 of Canada but lower than USD 0.92 of France, USD 1.05 of France and USD 0.96 of UK.