IOSR Journal of Business and Management (IOSR-JBM) e-ISSN: 2278-487X, p-ISSN: 2319-7668 PP 23-28 www.iosrjournals.org IES Management College and Research Centre 23 |Page (IESMCRC-2017) An Analytical View of Crude Oil Prices and Its Impact on Indian Economy Dr. K. Soundarapandiyan, Dr. M. Ganesh Professor, Sri Sairam Institute of Management Studies, Sri Sairam Engg. College, Chennai, India Professor & Director, Holy Angels School of Business, , Siruvachur, Perambalur, India Abstract: To tame inflation & to sustain rapid economic growth crude plays a vital role in VUCA market where in the world, India is positioned 4 th largest consumer of crude oil by importing 100 million tons of crude oil every year which falls 37 percent of the total import. Crude is a price determinant among various other commodities since rise or fall in price will directly have an impact on price of various commodities and society as a whole. Even reduction of one-dollar in price of crude impacts three-fold effect in the economy ie., saves the country about 40 billion rupees. The downward range of fall in oil prices nearly 55 percent since June 2014 authenticates the reason of oversupply from OPEC & US and sluggish demand in usage across the globe. India has recently adopted a pricing mechanism for its petroleum products which reflects the global crude prices. India’s reflection to the global trend on crude prices has an impact of 57 percent fall in price which India capitalized to fund its current account deficit which paved the way to stabilize the exchange rate. This paper addresses the impact of crude oil price on the Indian economy by considering the relevant inputs like Gross Domestic Product (GDP), Consumer Price Index (CPI)and Crude Oil Price for the period of 15 years (2001 – 2015). The proposed model to analyze the linkage among the key variables is done by using Regression model. Keywords: Gross Domestic Product (GDP),) and), Consumer Price Index (CPI), I. Introduction Oil is a magic word that always makes news. There is hardly a nation that does not seek this indispensable natural resource. A country that already possesses crude oil wants more. They struggle to explore it at almost any cost. The common man does not know much about this strange mineral oil although in almost every country he bears the burden of the cost of exploration of oil or its import. Oil is a vital input for the production of a wide range of goods and services, because it is used for transportation in business of all types. Higher oil prices thus increase the cost of inputs; and final product price increases cause inflation, if the cost increases cannot be passed on to consumers, economic inputs such as labor and capital stock may be reallocated. Higher oil prices can cause worker layoffs and the idling of plants, reducing economic output in the short term. In a net importer of oil economy like India, higher oil prices shrink foreign reserves of the economy, affect the purchasing power of the economy in terms of International trade. The increased price of imported oil forces the businesses to devote more of their production to exports, as opposed to satisfying domestic demand for goods and services, therefore cause inflation, even if there is no change in the quantity of foreign oil consumed Oil or Petroleum is defined in a variety of ways by geologists, chemists, refiners, engineers and lawyers. There is, therefore, no uniformity or full agreement. Since, it is a natural product forming a part of rocks, geological definition finds more general acceptance. The word petroleum is derived from two Latin words petra means rock and oleum means oil. Petroleum is loosely called „rock oil‟ or „crude oil‟. It is a generic term covering a wide range of substances comprising hydrocarbons, which are naturally occurring molecules of carbon and hydrogen. Global Primary Energy Consumption The global primary energy consumption at the end of 2011 is equivalent to 12274.6 Million tonnes oil equivalent. The share of oil is the largest at 4059.1 Million tones oil equivalent; i.e. oil: 33.06%; followed by coal: 30.34 %, natural gas: 23.67%; hydroelectricity: 6.45%; nuclear energy: 4.88%; renewable: 1.59% respectively. The demand for natural gas in future will increase as industrialized countries take strong action to cut CO2 emissions. World primary energy consumption is projected to grow by 1.6% p.a. over the period 2010 to 2030, adding 39% to global consumption by 2030. The growth rate has declined from 2.5% p.a. over the past decade, to 2.0% p.a. over the next decade, and 1.3% p.a. from 2020 to 2030. Almost all (96%) of the growth is in non-OECD countries. By 2030 non-OECD energy consumption is 69% above the 2010 level, with growth averaging 2.7% p.a. (or 1.6% p.a. per capita), and it accounts for 65% of world consumption (compared to 54% in 2010). OECD energy consumption in 2030 is just 4% higher than in 2010, with growth averaging 0.2% p.a. to