The 100$ per barrel for oil is wreaking havoc on retail prices everywhere in the world, but not in india. None of the consumers are feeling the pinch yet... Instead the governments simply sucking it up by using up all those excess foreign currency reserves.
Well, what else can the central government do? There are general elections around the corner and a couple of states seem headed to the polls too. the last thing they need is a backlash based on high petrol prices.
All the state refiners were ordered not to increase the prices, and they are buying into stabilization bonds being issued by the government to the tune of some 2,50,000 crores.
How long can the party last? Oil's not going back to the sweet old $60 levels of 2005 any time soon. How long can the costs not be passed to the consumer? The thing is once they do, it will drive up prices of all things from consumer durables to grocery items. If that dampens growth.. would that suck the steam out of the indian consumer machine. Well, we'd have to see!
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