Minister of State for Finance Jayant Sinha, in an interview to PTI, said Indian economy will be "fine" if the oil price stays in the range of USD 40-60 per barrel, but there could be a concern if it goes beyond.
The slump in oil price is one of the factors that has helped Indian economy notch up big gains by cutting its import bill and reining in inflation.
"If oil prices stay in the range that most forecasters are expecting them to be, which is in the USD 40-60 dollar range, then I think we will be fine. If it goes beyond that range, then it becomes a question," Sinha said.
India spent USD 63.96 billion on crude oil import in 2015-16, about half of USD 112.7 billion outgo in the previous fiscal and USD 143 billion in 2013-14. For the current fiscal, the import bill has been pegged at USD 66 billion at an average import price of USD 48 per barrel.
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Last week, Finance Minister Arun Jaitley too had stated that India can handle the current range of oil prices, but higher rates will impact economy and also lead to inflationary pressure.
"Obviously, higher crude prices is not good news for India. But If it remains within a range, as it is at present, it is something that can be handled. If it goes beyond the range, then certainly it creates an adversity," he had said.
Every rupee per litre increase in petrol price leads to 0.02 per cent rise in WPI inflation and 0.07 per cent for the same amount of increase in diesel rates.
When oil prices slumped in the second half of 2014 and 2015, the government hiked excise duty on petrol and diesel nine times to mop up additional revenues that helped it meet its revenue and fiscal deficit targets. In all, it raised excise duty on petrol by Rs 11.77 a litre and that on diesel by Rs 13.47.