Every $10 increase in crude oil price leads to 0.5% rise in current account deficit: UBS Securities

The benchmark indices of crude oil – Brent crude and US West Texas Intermediate (WTI) – surged over 1.5 percent Tuesday. They rose as high as $80.64 and $76.58, respectively—near a three-year high. Reacting to the surge, Tanvee Gupta Jain, chief India economist at UBS Securities, said that every USD 10 rise in oil, leads to a rise of 0.05 percent in the current account deficit.

Considering India imports 80 percent of the oil requirement, any increase in oil prices all of a sudden increases India's macro stability risk.

“Looking at oil at USD 80 per barrel, I would say the current account deficit in our base case is right now pricing in somewhere around 1.2 percent of gross domestic product (GDP) with oil at USD 70 a barrel. So every USD 10 a barrel increase in oil prices increases India's current account deficit by 0.5 percent of GDP,” Jain said in an interview to CNBC-TV18.