Why Oil Price Must Rise for the Stability & Growth of Global Economy

The Global economy is goingtowards downwards spiral. Russia, China, Japan, EU, Brazil all are struggling to revive their economy . Regarding Middle East countries they are worst hit area. The real culprit is drastic fall of oil which dented many countries such as EU, Whole Middle East, Venezuela, Russian economy. Most of the developed countries gets big orders from Oil generating countries as well as other product line. The fall in oil price prompted these countries to halt any further upgrade and went into current account deficit.

In my point of view, the competition between OPEC controlled countries attitude to keep the Shale gas producer out of the business impacted the initiator dearly. OPEC countries also refused to reduce the production quota in a fear of losing market share to non OPEC oil producing countries. In my point of view, both OPEC and Non OPEC Oil producing countries should sit together to create an strategy to stabilize the Oil price around $65 to $70 per barrel so that these countries start making some money and get some free cash flow which they can reinvest in their economy. In the current scenario, it wont be far when Oil producing countries with huge pile of cash burns most of their cash in order to maintain their countries social security. The new order from these countries will reignite the cascaded order process which will lead to new employment and revival of the organization.

Economic Slowdown in Russia, China, Middle East, Europe - Boom for Indian Equity Market

Global economy is going from bad to worst. Many diplomatic to economic trigger is impacting global economy in such a bad manner that it will not be far when some of the countries will go bankrupt. Exactly four years back, Greece, Portugal, Spain triggered the recessional nose pin in European Union economy which in turn forced International Monetary Fund to jump in to safeguard some of the countries to get defaulted on their debt servicing to repayment. The government led social welfare cut an increase in taxes impacted the citizen buying power as well as increased the price point. The self inflicted financial tornado started gripping whole European Union and its member countries since then poured inBillions of Euro to support financial weak countries. It crippled the industrial growth.

At the same time, Wide spread conflict in Middle East and Africa impacted many countries ability to kickstart new projects. To add the fire further, the main source of their earning from Oil dipped down by 60% and they started supporting their countries through their foreign reserve to win the heart of local citizen. New investment dried down.

Latin America based countries like Brazil, Venezuela and battery of other counties are struggling to maintain their economy. Given the size vs population; those countries are not that big that they generate local demand.

We all know Japan few days back announced stimulus package to kickstart their economy whereas China economy isslowing down faster than expected. China being the center point of major commodity to energy buyer started slowing down their activities and many indirectly government supported companies who took huge debt in order to invest overseas as well as locally is on the verge of collapse.

On a contrary; Indian Central Bank, RBI government took very conservative and cautious channel to protect India from any direct or indirect impact of global financial turbulence and steered India to  stage where growth started picking up. I must admit that government also took proactive approach to protect local industries from dumping. The recent reforms on bankruptcy, Land reform and many others offered great deal of confidence to International investor community to start investing in India. The major beneficiary of such investments is Indian Mid cap companies who is catering Indian consumer more than International one. Their equity price is going up like wild fire as their financial performance is better than large Cap companies.

With recent indication from government released data, it is expected that Q3, FY 17 result from corporate India will be fabulous. The good earnings report of Q1,FY17 is the clear indication of the same. Its the right time to invest your hard earned money and leave that money as pension fund and enjoy the return in 2 to 3 years horizon as it is guaranteed that Foreign Institutional Investors will be major buyer of Indian equity in coming weeks, months and years

Disclaimer Consult your advisor before investing. Above is author personal view