Panch Tattva Wisdom

There is a great deal of anxiety whenever global oil prices rise. While caution is always justified, the scale of India’s vulnerability is often overstated.
India’s oil import bill today is roughly 3–4% of GDP. In earlier decades this ratio was much higher, sometimes approaching 8–9%. This means that, relative to the size of our economy, oil is a far more manageable burden today than it used to be.
When prices rise, the impact is felt through inflation, transport costs and pressure on the current account. But a large and diversified economy like India has the capacity to adjust. Some moderation in consumption, some improvement in efficiency and some export growth can offset a large part of the pressure.
In fact, rising prices may offer an opportunity to move toward a more rational policy framework.
Petroleum product prices should ideally be fully market-oriented. When prices reflect true costs, consumption becomes more disciplined and waste is reduced. Artificially suppressing prices benefits heavy users of fuel more than the poor and encourages inefficient use of a scarce resource.
At the same time, the poorest households should be protected. Instead of distorting fuel prices for everyone, the government can compensate the bottom 20% of households through direct cash transfers into their bank accounts. This would ensure that those who truly need support receive it without encouraging excessive consumption across society.
There is also a deeper reality we must accept. Oil is a finite resource. It is not unlimited in the womb of Mother Earth. Over time, humanity will inevitably move toward alternatives—electric mobility, renewable energy, and other technological solutions.
Higher and market-based fuel prices can accelerate this transition while encouraging conservation today.
Economic policy often works best when it combines three principles: realistic pricing, protection of the vulnerable, and preparation for the future. A balanced approach to petroleum pricing can help India achieve all three.
— Krishna