India's Growth Hits the Wall; Implications for Oil?

BusinessWeek is running an article stating that India's growth is expected to drop ffrom 9% to 7% this year. As one of the countries gulping oil, will this help to pop the oil bubble?

BusinessWeek has just published an article entitled India's Economy Hits the Wall.  The article states that

"The country is reeling from 11.4% inflation, large government deficits, and rising interest rates. Foreign investment in India's stock market is fleeing, the rupee is falling, and the stock market is down over 40% from the year's highs. Most economic forecasts expect growth to slow to 7%—a big drop for a country that needs to accelerate growth, not reduce it. "India has gone from hero to zero in six months," says Andrew Holland, head of proprietary trading at Merrill Lynch India (MER) in Mumbai. Many in India worry that the country's hard-earned investment-grade rating will soon be lost and that the gilded growth story has come to an end."

If this is the cast, what's the implication for oil prices?  We have heard that it is growth in the developing countries of China and India that are creating strains on world oil supply.  But the current economic downturn has turned global and both India and China are reeling from higher prices and the impact of soaring energy costs. 

What happens to the cost of oil when the whole world slows down?

Sam Cass
Sam Cass: Sam Cass, MBA, JD, University of Texas at Austin. Always a fan of Leonardo Da Vinci.

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