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Modi's honeymoon with crude oil set to get over: Hard times ahead

Modi took full advantage of falling crude prices. He was the first to increase taxes on petroleum products which many other countries followed. Thanks to this decision Indian, Economy got the much needed boost because of extra Governmental spending on Infra projects.

Modi had many other contributing factors before this Honeymoon period started, which the OP failed to list.

1. Empty coffers inherited by NDA
2. Economic Growth in reverse mode.
3. Foreign Investors running away from India.
4. A corrupt to the core system.
5. No Defence acquisition in decade.
6. India Businessmen setting up units outside India.
List can go on....

Indian economy is getting back on track because of Good Governance, total transparency, zero corruption by Modi Sarkar.

Therefore Modi's honeymoon is due to his policies and will continue irrespective of outside factors.
 
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What ever said and done, "Modi Had a very long Honey moon with crude oil price"...... The way things are he is in no mood to reduces the taxes until the fuel price reaches certain limit........ It will be interesting to see how "Bakths" justify this.....

No offense, but this is the kind of mentality that expects everything free of pain that keeps us all down. Isn't it the same mentality that prevented hiking Railways Fares perpetually for political mileage - ultimately pushing the state transporter to mediocrity in services and bankruptcy in accounts without any fresh investments?

If you think about it, it was far easier for Modi to reduce the fuel prices in accordance with the falling crude prices and gain political mileage out of it (just like what Nawaz attempted in Pakistan). After all, Modi wasn't going to pay from his own pockets and reducing the fuel prices would have been a politically popular move too.

In stead of that, Modi should be commended for choosing the more difficult and politically unpopular decision to hike the price and use the resources to repair the faltering fiscal situation of the country.

Bottom line being, Modi or MMS, we should support this since it is directly funding public spending.


Jo sabke saath hua woh humare saath nahin hua abhi tak. When the crude went one third of its cost to around $29, did the oil price come down to one third? No.....Instead Mr. modi increased the excise and started using it as another source of income to bridge the fiscal deficet. Now when the crude is gain momentum, this additional income source will dry out soon and his all pet projects including fiscal defict is going to haunt him....untill he will find anohter funding source for his projects this is gonna hit him hard.

Don't forget
- Although the price of crude was low in $ terms, the Rs/$ exchange rate was not good either.
- The lesser the fuel price was, the lesser revenue the government got in terms of % value in excise. Hence there was a need to recover at least part of it.

Given that the inflation situation was not bad, Modi did a smart thing by hiking the price of petrol/diesel.
 
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What ever said and done, "Modi Had a very long Honey moon with crude oil price"...... The way things are he is in no mood to reduces the taxes until the fuel price reaches certain limit........ It will be interesting to see how "Bakths" justify this.....

Wonder what happen to those statements by"Modijeee" when he was CM of Gujarat?????? Is there any relevance now ????

Which statements are you referring to ?

No offence meant but..

I notice a common thread running among most Indian members here who are have been given ranks or made TT / Mods etc - They all dislike Modi or at least most do.

I wonder if thats a QR to be elevated ?

I hope I havent stirred a hornets nest by airing this observation.
 
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NEW DELHI: Besides the outgoing US President Barack Obama , Prime Minister Narendra Modi has had another dear friend through his tenure, crude oil.

On May 26, 2014 when Modi assumed office, Brent oil prices stood at $105 a barrel, today they stand at $50.

In the first 18 months of his tenure, crude oil prices plunged to their 13-year lows at $27.10 a barrel in a rare alignment of stars that has allowed the Modi government enough leg room to make a big push in areas like infrastructure, rural sector and social welfare.

So far, so good.

Hike excise, benefit India
The Modi government's strategy has been simple: hike excise duty on crude oil to rake in a windfall in times of resource crunch to invest in creating capital asset.

According to some calculations done by Jefferies India, the government may have raked in as much as $70 billion through this phase of low crude oil prices.



Of this windfall, 64 per cent went into the government coffers. The Modi administration hiked excise duty on petroleum products five times through FY2016 and by 140 per cent on diesel.

Those windfall gains helped the Finance Minister stick to his fiscal deficit target of 3.9 per cent in the financial year ending March 31, 2016, and also push spend on critical infrastructure such as roads and railways besides bolstering the social welfare schemes.

The government became a champion of growth and saviour of capital expenditure spending in the country because of the plunge in the black gold .

With the current account deficit and inflation under check, the Modi government compensated for the lack of big-bang reforms with big-bang spending.

But at whose expense?
In recent times, there has been a spike in retail fuel prices, with petrol prices rising by Rs 4.47 a litre and diesel prices by Rs 6.46 a litre, taking them to their highest levels in a year.

Watch this: on November 1, 2014 retail petrol price in Delhi stood at Rs 64.24 a litre when the price for Indian crude basket stood at Rs 5146.16 a barrel, data compiled by ETMarkets.com show.

Today, when the price of the Indian crude basket has almost halved to Rs 3150.67 a barrel, retail prices in Delhi stand almost at the same level at Rs 65.6 a litre.

So, you dear reader, have not really benefitted in this equation.

A new headache?
From all indications, the hunky-dory relationship between Modi and crude oil is set to enter a rough patch.

Ever since it hit a 13-year low of $27.10, the black gold has rebounded 85 per cent and entered a territory that can turn the boon situation into bane.

"As oil touches $50 a barrel, India's honeymoon period on inflation and low current account deficit may get over," Uday Kotak , Executive Vice-Chairman & MD of Kotak Mahindra Bank, said in a tweet.
The bigger headache will be a rising oil bill for the end user, as higher fuel costs may push up prices for other goods and negate the good work done by the Reserve Bank of India (RBI) to control inflation.

It will also raise doubts as to whether the government can meet its 3.5 per cent fiscal deficit target for FY2017 now that the windfall from oil prices is all but exhausted.

The government says it would roll back the excise duty hike if international oil prices were to hit the $60 mark, which they might do soon if Saudi Arabia had its way in the ongoing Opec meeting in Vienna.

According to reports, the Middle Eastern Kingdom plans to revive the failed plan to freeze output at January level in order to prop up fuel prices further.

Arvind Sanger of Geosphere Capital Management said he was probably too cautious in his estimate of oil hitting $60 by the third quarter of 2016.

"I think oil prices are headed much higher and probably uncomfortably higher over the next six to 12 months to cross $70 at some point.
So far it has been good, because I think oil prices are moving up in conjunction with pretty decent demand growth. But I think one of the risks for India and global markets is that inflation may now edge upwards," he said.



I really hope GOI has hedged atleast 50% of oil for the next 5 years.

Does anyone know anything in reference to this?
 
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Which statements are you referring to ?

Those statement on fuel hike and protest during UPA...... Few of his tweets are very much available on PDF....

I notice a common thread running among most Indian members here who are have been given ranks or made TT / Mods etc - They all dislike Modi or at least most do.

I havent observed anything as such, since you quoted my post and come to such conclusion i assume that you also believe that i do not like Modi......... To be honest i am surprised to read such assumptions from you,(have been noticing you for a long time here),You came to such an assumption based on a single post...... As a person There several things i like in Modi and several which i do not or agree to, similarly on the policies of the govt..... I do express it in this forum.... I have been doing it even during UPA regime..... and I will continue it......

I wonder if thats a QR to be elevated ?

I leave it to the forum management to address on the criteria on selecting TT's or Mods.......
I hope I havent stirred a hornets nest by airing this observation

Not for me atleast,
 
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Which statements are you referring to ?

No offence meant but..

I notice a common thread running among most Indian members here who are have been given ranks or made TT / Mods etc - They all dislike Modi or at least most do.

I wonder if thats a QR to be elevated ?

I hope I havent stirred a hornets nest by airing this observation.
He is a PDF THINK Tank lol enough Said ... they are not even worth a reply... A third rate Troll with a Think Tank Tag who uses Terms like Bhakts for Government supporters without any provocation...


This was a god gifted opportunity for MODI government and I am a Happy that he used the opportunity at the best... Oil prices are not gonna increase above 65 Dollar in another 2 years... The only thing which can rise the prices is growth in consumption in Western market , infrastructure Superboom in India and African Countries or a war between Saudi and Iran... all of which are unlikely ...

well a Venezuela situation can inflate price for oil...

With Total Saving of 150 Billion $ from OIL ever increasing FDI, By the end of 4th years Money would start pouring into the Jan Dhan Accounts ... Economy would be growing 9% to 10%, Low inflation... would Give a second Term for MODI Government.

But everything said MODI Government should start taking bigger steps on FDI and also making capital available for co-operate sector ... Vijay Mallaya Scam should not overshadow this...
 
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Guys simple maths......
Assuming consumption remaining constant what will be tax collected which is say 10% at 100 bbl VS 50% at 25 bbl

Not much have changed its that Govt is just trying to protect its income by raising tax when prices fall.

After all tax is coefficient of price....
 
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He is a PDF THINK Tank lol enough Said ... they are not even worth a reply... A third rate Troll with a Think Tank Tag who uses Terms like Bhakts for Government supporters without any provocation...


This was a god gifted opportunity for MODI government and I am a Happy that he used the opportunity at the best... Oil prices are not gonna increase above 65 Dollar in another 2 years... The only thing which can rise the prices is growth in consumption in Western market , infrastructure Superboom in India and African Countries or a war between Saudi and Iran... all of which are unlikely ...

well a Venezuela situation can inflate price for oil...

With Total Saving of 150 Billion $ from OIL ever increasing FDI, By the end of 4th years Money would start pouring into the Jan Dhan Accounts ... Economy would be growing 9% to 10%, Low inflation... would Give a second Term for MODI Government.

But everything said MODI Government should start taking bigger steps on FDI and also making capital available for co-operate sector ... Vijay Mallaya Scam should not overshadow this...
I don't think the price of oil can ever go above 60 to 70. At this price the most expensive fracking becomes viable and the supply of oil increases.

There is no going back to $100 a barrel ever again.
 
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I don't think the price of oil can ever go above 60 to 70. At this price the most expensive fracking becomes viable and the supply of oil increases.

There is no going back to $100 a barrel ever again.

Fracking is not sustainable in long term as it pollutes groundwater and disturbs tectonic balances resulting in earthquakes on more regular basis.The local population around the area where fracking takes place has to face many challenges.
 
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What ever said and done, "Modi Had a very long Honey moon with crude oil price"...... The way things are he is in no mood to reduces the taxes until the fuel price reaches certain limit........ It will be interesting to see how "Bakths" justify this.....

Wonder what happen to those statements by"Modijeee" when he was CM of Gujarat?????? Is there any relevance now ????

Taxes and Revenue were not the only motive behind keeping the crude prices high- Promoting Green(Solar) energy was one of the other major motive-

I don't think there would be any problem for the Govt- to maintain deficit targets as long as prices remain- below $80/barrel- Hopefully the Agriculture sector revives this season so that the bio fuel plan gains some momentum- I guess you know about 10% bilo fuel plan of this Govt-

The problem in UPAII was not rising fuel prices but nothing done by the then Govt- to overcome this issue in long term- Indians can tolerate short term losses but one thing they will never tolerate is nothing being done in the longer run to mitigate these short term losses-
 
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Fracking is not sustainable in long term as it pollutes groundwater and disturbs tectonic balances resulting in earthquakes on more regular basis.The local population around the area where fracking takes place has to face many challenges.

True. Recently I read about Earthquakes in Oklahoma, USA which is considered to be seismically stable in relative terms, directly attributed to "fracking" done there.

I don't think there would be any problem for the Govt- to maintain deficit targets as long as prices remain- below $80/barrel- Hopefully the Agriculture sector revives this season so that the bio fuel plan gains some momentum- I guess you know about 10% bilo fuel plan of this Govt-

Actually bio fuels are really overrated and cause many more problems than they solve. For one, they take away precious fertile land away from growing food to producing commercial grade bio fuel. Secondly, the farming needed to grow bio-fuel is very water-intensive - sugarcane and Soya. Recently there were reports of severe water shortage faced by bio-fuel producers in Brazil (although the drought there didn't help the matters either).

I would be much more happy sticking with Solar and wind than divert our scarce farmlands to produce biofuels.

The problem in UPAII was not rising fuel prices but nothing done by the then Govt- to overcome this issue in long term- Indians can tolerate short term losses but one thing they will never tolerate is nothing being done in the longer run to mitigate these short term losses-

Agreed, but what also really pis*ed many Indians was the impunity with which UPA2 was indulging in multi-billion dollar scams "literally" every other day on top of the inflation and the high fuel rates.
 
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Actually bio fuels are really overrated and cause many more problems than they solve. For one, they take away precious fertile land away from growing food to producing commercial grade bio fuel. Secondly, the farming needed to grow bio-fuel is very water-intensive - sugarcane and Soya. Recently there were reports of severe water shortage faced by bio-fuel producers in Brazil (although the drought there didn't help the matters either).

I would be much more happy sticking with Solar and wind than divert our scarce farmlands to produce biofuels.



Agreed, but what also really pis*ed many Indians was the impunity with which UPA2 was indulging in multi-billion dollar scams "literally" every other day on top of the inflation and the high fuel rates.

I too thought similarly- But there's a solution to this problem- plus sugarcane crop is usually surplus in India-

https://www.geneticliteracyproject....olerant-sugarcane-in-face-of-water-shortages/

I agree Solar Energy should be the main focus and Wind where ever possible-

Yes UPAII Scams were the "Major" reason-
 
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I too thought similarly- But there's a solution to this problem- plus sugarcane crop is usually surplus in India-

https://www.geneticliteracyproject....olerant-sugarcane-in-face-of-water-shortages/

I agree Solar Energy should be the main focus and Wind where ever possible-

Yes UPAII Scams were the "Major" reason-

I am not convinced that sugarcane is the solution to any of our problems.

In fact, in many of the regions of Vidarbha/Marathwada and some places in Karnataka where there was severe scarcity of water, overgrowing sugarcane was the main culprit. Growing sugarcane has political backing since many of the Maharashtra politicians (read Pawars) own or have vested interest in hundreds of sugar mills.

Also, from farmers' POV, growing sugarcane is much more easier than other crops and more profitable even when there is huge oversupply (due to an unreasonably high Minimum Support Price set by the governments - again with full political backing that have vested interests). So farmers don't think twice about growing sugarcane even when they know fully well that they are draining their entire water table!

What that does is that a few very rich farmers end up using all the water for their sugarcane/paddy/banana for exports while other marginal farmers and poor city folks don't have a drop to drink and also starving the whole region by not growing the staple food crops which are not that dependent on water.

Actually, I am against MSP for all water-intensive crops. Let the market forces determine the price of those commodities which are water-intensive to begin with. At least that will deter some of our farmers going just for sugarcane or paddy or banana.
 
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