Cheap oil typically boosts economic growth in India, and helps put it on a course to fiscal and current account balance. For most of its two terms, the Modi government has used depressed oil prices to pull back on the fiscal deficit while forex reserves kept piling up. The drawdown in 2022 has also been reversed. The fiscal space created by an extended period of low crude oil prices has allowed GoI to bump up welfare spending and capex. These are the principal economic achievements on which it will be seeking a third term.
With a low likelihood of oil playing truant before the general elections, BJP should not need to have to defend its economic management of back-to-back crises. It has delivered on growth in extreme conditions and has moved the reforms needle in less taxing times. A big chunk of the reforms agenda, notably privatisation, remains work-in-progress. The ruling party, however, can rightly claim to have made it easier to do business in India. In the process, India’s economic and, hence, political prospects are less dependent on oil prices as the country swivels towards alternative energy sources.
