This study analyzes the impacts of international crude oil fluctuations and energy subsidy (on LPG, petrol and diesel) removals on Indian economy. We have applied computable general equilibrium (CGE) modelling as our relevant methodology, following Shoven and Whalley ( J Econ Lit XXII: 1007–1051, 1984) based on energy social accounting matrix (ESAM) of India for the year 2007–2008. It is seen that the international crude oil price fluctuations has a greater effect in determining gross domestic product (GDP) and exchange rate as compared to the effect of energy subsidy removal. With decrease in international crude oil price, GDP increases and exchange rate appreciates. On the other hand, with decrease in energy subsidy, GDP decreases and exchange rate appreciates. Moreover, with introduction of direct cash transfer scheme in lieu of subsidy for LPG, it is seen that the impact on demand of LPG (substitution effect) is negligible indicating that LPG is an essential commodity.
India’s growth story has attracted worldwide attention, particularly because this growth has been fuelled by the wide-ranging economic reforms introduced since early 1990s. A distinctive feature of Indian liberalization was the gradual and calibrated manner in which the reforms were introduced in the various sectors of agriculture, manufacturing and services. This article is a modest attempt to capture the role played by trade liberalization and foreign direct investment (FDI) policies in growth and development of different sectors in India. We applied computable general equilibrium (CGE) modelling as our relevant methodology following Das and Chakraborti (doi:10.1007/s40622-013-0003-3), 2013. The article constructs a social accounting matrix (SAM) and attempts to analyze the impacts of reduced import tariff and increased FDI on export–import volumes of different sectors and on exchange rate, GDP, rural and urban income levels and government income under perfect competition market structure. The study reveals that reduction in import tariff increases imports leading to a depreciation of home currency and boosting exports. On the other hand, increase in FDI appreciates exchange rate, making import cheaper and so import increases in all sectors. Export becomes less profitable leading to a reduction in sectoral export.
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