Another reversal in the commodity price cycle might add to problems

Prices were becoming softer, but that’s no longer the case. The trend in India’s crude oil basket (COB) price seem to suggest this. Monthly average price of India’s COB fell continuously from $116 per barrel in June to 90.7 in September. This was good news for the Indian economy, which imports more than 80% of its energy requirements, and has been dealing with a high inflation environment. However, this trajectory seems to have stalled, if not reversed definitively, in the month of October with average COB price climbing once again to $91.7 (it increased to $92.25 on November 1). Whether or not the trend of stalling/reversal of easing energy prices continues could have a large impact on both the inflation situation as well as fiscal arithmetic. Both of these have the potential of affecting the economy’s growth trajectory in the near future.