Study on impact of foreign exchange value of Indian rupee on relationship between international crude oil prices and petrol prices in Indian market

Rising oil prices are often seen as inflationary by policy-makers and the central bank automatically responds to inflationary pressures by raising interest rates. The impact of recent changes in the foreign exchange value of the Indian currency is often quoted as one of the most important factor in the determination of the petrol prices. The decision to deregulate price of petrol in India have led to a constant hike in petrol prices and it has led to a flurry of heated discussions on a lack of proportionate change in petrol price determination. The current study attempts to find out the correlation between International crude oil price and Indian petrol price, by taking away the impact of Exchange rate. The study observes that the frequent change in foreign exchange value of Indian rupee is playing the spoil spot, as it is restricting the Indian petrol prices from benefitting from the reduction in International crude prices.