Sunday, June 3, 2012

GDP gets low, fuel prices go high !!!

 The fourth quarter GDP figure has taken a hit, at 5.3 % it is the lowest in 7 years including the period (2008-2010) in which the world economy seemed to have slumped into a lull which raised the concerns of the likelihood of it turning into an economic depression like the one in 1929 which brought down the business activity and financial services around the world to its knees, major central banks around the world went on a rate cut spree and the major world economies got themselves into the quantitative easing measure mode to arrest the slump, still the business activity around the world seemed far less from enthusiastic, corporations were shedding excesses to stay viable leaving no doubts that there has been a steady downside pressure on the consumption since 2007, credits were not forth coming, banks ceased to transact, the call money market was going berserk each day, but even then the Indian economy performed well not very much owing to the huge public spending the state got itself involved in, back then the Indian economy showed actual resilience owing to some very impressive performance of different sectors which kept the mood and the business activity upbeat even when the crude oil prices in the international oil market were reaching for the sky, though for some time the state took some of the hit in the form of not subjecting to the pressures to raise the oil prices in accordance to the international oil market prices, it dint last long until the government in June 2010 decided to decontrol the fuel prices and paired it to the fluctuations that crude oil prices go through in the international oil market.
                                     The GDP figures for the the first 3 quarters of 2010 was a whopping 9.2 % even after the government decided to decontrol the fuel prices, but since the second quarter of 2011 there has been a steady decline in the quarter GDP figures leading to the present level of 5.3%, the average price of a liter of petrol before the government decided to decontrol was Rs 47.93 but now it costs Rs 77.23 and the Gross Domestic output is on the verge of reaching the levels of all time low. Why don't the fuel prices reflect the actual fall in the consumption and the actual fall in the commercial business activity in the economy?, and why is the fuel prices reaching for the skies even when the price of the crude oil has eased a bit from the levels its was in 2009 ?. The Oil marketing companies have posted a nominal profit for the fiscal 2011-12, for the period 2012 January - march quarter alone, Indian Oil Corporation reported a profit of Rs 12,670 crore and Bharat Petroleum corporation limited a profit of Rs 3,962 crore, though the oil marketing companies are underplaying it by calling these profits as long over due with their receivables touching nearly Rs 1,50,000 crore it only makes wonder about the functioning of a free market economy in which the state is also a major player.
                                        Oil being an essential resource the oil marketing companies could very well ignore the pressures of the market to make "huge" profits to offset some hypothetical future turbulence that a hypothetical free market economy always throws up, the indian oil Corp and other state owned oil marketing companies have to define the essentiality behind their need to make "huge" profits, and Oil being a commodity so precious and so essential a resource should not be allowed to aide the indulgence a free market economy always provides for when it comes to making boundless profits, which might be beneficial for quite a few investors but one has to take a holistic approach and look at the bigger picture when a commodity so essential as oil is invovled in the functioning of the economy. Having said that these state run oil marketing companies should have turned into energy solutions centers long time ago providing answers to our countries ever increasing energy demands and needs by investing themselves and their resources in search of cheap and alternate sources of renewable energy. As of now our countries energy policy is so screwed up that the oil price factor seems likely to loose its sensitive nature on the kind of influence it wields on the broader political economy and whom do we have to blame for all this ?, I would blame it on all the rotten minds who have run and are now behind the scene people in the oil Ministry.

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