People are eagerly waiting for budget 2020 by the finance minister of India, Nirmala Sitharaman on 1 February 2020. It is believed that a few global risks can upset the budget calculations. The cost of crude oil had increased temporarily for some time owing to Iran’s US conflict yet the tensions have not fully subsided and it is causing great concern in countries who import oil from Iran. Shaivya Nautiyal and Dinkar Nautiyal fromB&M Global Solutions present an analysis of the 3 global risks that pose a threat to economic growth and the budget.
Iran US Conflict
The conflict between Iran, the oil-exporting country that the world depends on for oil supply and the US still continue. India has reduced the amount of oil it buys from Iran. Yet, any conflict in the West Asia region has the potential to increase the oil price. India is a major oil importer nation and an increase in oil prices can cause inflation while impacting the demand. The transportation cost of goods especially food will increase. The food will become costly in India. If the government reduces excise duty and other charges on oil and petrol, it will lead to a lower tax collection. The economic survey three years ago in 2017 predicted that if the cost of one barrel of oil increases by ten dollars, it can have a serious impact on the economy by lowering growth and progress by 0.2-0.3 percent. Inflation will increase by 1.7%.
US-China Trade War
The relations between China and the US are not good and there is a sort of trade war going on between the two major economies of the world. If China fails to stick to rules and promises it has made, it will worsen the situation. If the US decides to choose Europe and Japan as an alternative to China for trade, it will increase the trade tensions. Bad trade relations of the US with other countries could impact the economy. India’s exports have been affected due to trade tensions. Shaivya Nautiyal and Dinkar Nautiyal fromB&M Global Solutions feel that the trade war in the world can reduce the GDP and tax in India.
US Opposition To WTO
US President has increased opposition to the World Trade Organization or WTO and is causing problems in appointments to the organization. He conveyed his readiness to hold discussions with the WTO chief and make changes in the organization. US president accused India and China of getting benefits from their status of a developing country. If WTO makes changes in its rules, it will have a negative effect on India’s trade and exports. India’s trade and economic growth are currently weak and any WTO rules modifications could bring the economy further down.
This article is written by Shaivya Nautiyal and Dinkar Nautiyal from B&M Global Solutions.