Crude oil price surge and its economic implications for india: policy simulations using a CGE framework

T. Mohanasundari (), M. Prahadeeswaran, Biswajit Sen and Anushka Chauhan
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T. Mohanasundari: Indian Institute of Technology
M. Prahadeeswaran: Tamil Nadu Agricultural University
Biswajit Sen: ICAR-National Dairy Research Institute
Anushka Chauhan: Indian Institute of Technology

SN Business & Economics, 2025, vol. 5, issue 12, 1-25

Abstract: Abstract Global food commodity prices have recently surged to unprecedented levels, significantly impacting economies worldwide. As a major oil importer, India has faced severe economic challenges due to these price fluctuations. This study examines the effects of escalating crude oil and commodity prices on the Indian economy using a Computable General Equilibrium (CGE) model, with simulations exploring various policy responses. Findings reveal that the agriculture sector’s share in GDP has declined, driven by high crude oil prices. This increase in crude oil prices also contributes to higher domestic price levels, reducing private consumption. Reducing sales tax helps offset some adverse effects of rising import costs while government revenue remains relatively stable. Additionally, a progressive tax policy on higher-income groups shows promise in both boosting government revenue and reducing income inequality. Based on these results, a tax policy focused on wealthier segments is recommended to balance economic stability with social equity.

Keywords: CGE analysis; Indian economy; Indian taxation; Crude oil prices (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s43546-025-00971-z

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