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Crude Oil Price and Steep Depreciation of Indian Rupee

Crude oil price has been on surge for the past few months due to multiple factors. The deliberately tightened crude oil supply by the OPEC and allies, significant increase in demand in North America, geopolitical tension among West Asian countries, improving global economic growth, US Government's stand against Iran compelling their allies to cut short the import and unexpected decline in production in Venezuela are the major factors behind the price resurgence that happened to be in favour of the oil producing countries (The Guardian). The price of crude oil per barrel stage by stage hiked from nearly $ 46 in June 2017 to $78 in June 2018. The cruising crude oil price in the international market will pretty affect Indian economy since it has been the single largest import item in the country. India produces hardly less than one fourth of the total consumption. Importers' demand for US Dollar has increased significantly with the recent surge in crude oil price. Thus it is pretty clear that the steady rise in crude oil prices have depreciated the currencies of the oil importing countries significantly. The steady rise in exchange rate of around INR 64 a dollar in June 2017 to around INR 68 a dollar in June 2018 has been primarily contributed by the crude oil import that constitutes around 14 per cent of India's total imports. At the same time, depreciation of Indian rupee has raised the import bill further as well.

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