3. India depends on imports for 75% of its oil needs. Analysts feel that the demand for oil will increase further in the future. With the help of facts and figures evaluate the extent of the problem and future threats that India could face due to excessive dependence on imports. What concrete steps should India take to become a less oil dependent economy?
• Introduction with figures telling the current dependence of India on imports for oil needs
• Figures and facts for problems and future threats due to excessive dependence on imports
• Steps to become a less oil dependent economy
Let’s start with few statics:
Oil - consumption: 2.722 million bbl/day
Oil - production: 880,500 bbl/day
Oil - imports: 2.159 million bbl/day
India is on the 8th rank on the oil import index worldwide.
Oil, being an ‘edge worth good’ thereby implying that it is used in the production and manufacture of almost all commodities, assumes an important role in the decision making process. A nation endowed with large reserves of oil has a strategic importance in the world economy as it is a very lucrative source of foreign exchange. Every nation demands oil and nations with large quantities of it thereby have a bargaining power in the international trade. Given the importance of oil in the economy of any nation, no country will try to disturb their relationship with the oil producing nations.
Also, each country would like to minimize its dependence on oil imports either by exploring oil fields in its own boundaries or by developing oil substituting inputs. There are manifold reasons for this:
• An increase in the price of oil in the international market will adversely affect the balance-of-payment situation for an oil importing nation like India. Given that no matter what since oil has to be consumed, the expenditure on oil imports will rise and thereby worsen the BOP situation.
• The importing nation will...
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