Different sections of the media had almost contradictory accounts of what took place in New Delhi on Monday, when Prime Minister Narendra Modi sat down with visiting ministers from some of the countries that supply oil to India, as well as chief executives of top oil and gas companies. The Press Trust of India said that Modi “warned” oil producers like Saudi Arabia about the effects of high crude prices. Reuters, however, said Modi “urged” and “requested” oil suppliers to give relief to India. PTI also said Saudi Arabia committed to meeting India’s rising oil demand, but NDTV pointed out that Modi’s call for prices to be kept in check got a negative response from the Saudi oil minister.
However you look at it, the events of the Monday were a far cry from the euphoria of Modi’s first few years in office, when he cited his naseeb, his luck, as the reason oil prices had fallen to tremendous lows, helping India balance its current account deficit and keep what had previously been stubborn inflation in check. That naseeb has long changed. Oil prices, which were as low as $43 a barrel in 2015, are now above $80 and traders are betting on the rates going above $100 a barrel again.
Combine that with fresh sanctions against Iran, the third-largest supplier of Indian oil, kicking in next month, potential volatility between the US and Saudi Arabia over the killing of journalist Jamal Khashoggi – which could play havoc with the oil market – and a steep drop in the value of the rupee, and the Indian economy could be facing some serious trouble. The oil subsidy bill is already 84% higher than the budgeted estimate for the whole year. In an editorial on Monday, the Business Standard also pointed out the scare caused by the IL&FS crisis and dampening responses to consumer surveys that together suggest one thing: “India and Indian policymakers must brace for a slowdown.”
Analysts from across the board, including those generally supportive of the current administration, are warning of of difficult times ahead. Swarajya’s R Jagannathan is, in fact, so concerned about the state of the economy that he is calling for a “mini-budget” in the upcoming Winter Session of Parliament. Even if they were to do that, Modi and his team’s economic policymaking does not inspire confidence. Demonetisation and the botched roll-out of the Goods and Services Tax now don’t just look like monumental mistakes but also as massive speed breakers, preventing the economy from accelerating at a time when oil prices were low.
Now Modi’s team will have to figure out how to balance the problems of stress on the balance sheet, darkening global clouds and a general election on the horizon, a time when governments generally prefer to loosen their purse strings, especially if conditions are bad. None of that bodes well for the health of the Indian economy, especially considering the government’s stewardship of the economy so far. It seems the best Indians can do is be wary of any rabbits being pulled out of Modi’s hat, and instead hope and pray that the prime minister’s infamous naseeb changes for the better before things get worse.