Impact of Energy Price on the Profitability of the Indian Manufacturing Industry: A Panel Data Analysis

Abstract

  The intricate relationship between energy prices, particularly oil, and the profitability of the manufacturing industry is a critical area of study for economies like India, which are heavily reliant on energy imports. The period from 2000 to 2019 has seen significant fluctuations in oil prices, impacting the cost structures and profit margins of manufacturing firms. Studies have shown that higher oil prices can lead to increased energy efficiency as firms strive to maintain profitability. However, the adverse effects of rising oil prices on production costs and investor sentiment cannot be overlooked, as they directly influence the financial performance of industries. The volatility of oil prices, driven by geopolitical tensions and market dynamics, presents a complex challenge for businesses, affecting everything from production costs to stock market performance. Understanding these dynamics is crucial for policymakers and industry leaders to navigate the economic landscape and foster sustainable growth in the face of energy price instability. The analysis of panel data using fixed effects and random effects models provides valuable insights into the determinants of profitability, highlighting the significant role of oil prices in shaping the industrial sector's financial health.

Keywords: Energy Price, Oil Price, Manufacturing, Panel Regression, Crude oil