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The crisis in Iraq has put pressure on India’s finances, Finance Secretary Arvind Mayaram has said.
Speaking during a G-20 (Group of 20 nations) meeting in Australia on Sunday, Mayaram said: “Recent developments in Iraq have created huge uncertainties with an overhang on the global economy. The volatility in petroleum prices has put pressure on the fisc in countries like India.”
Mayaram’s worry is justified as India imports two-thirds of its crude requirement and Iraq is its second-largest supplier after Saudi Arabia. The price of the Indian crude basket has soared from $106.88 on June 2 to $111.94 on June 19. At the same time, the rupee has weakened against the dollar and is now hovering at 60.20 compared with 58.50 early this month.
Every dollar increase in the oil price raises the import bill by ₹7,500-8,000 crore. Crude price spike also fuels inflation risks and widens the trade deficit. As the Government subsidises diesel, kerosene and domestic cooking gas, a hike in the price of crude will raise the subsidy bill. According to a Finance Ministry statement, Mayaram also said the Budget would unveil reforms but did not give specifics. In its first Budget, to be presented in mid-July, the Government is expected to announce measures to boost investment apart from tax reforms including a plan for the rollout of the Goods and Services Tax.
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