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India’s Macroeconomic Variables Response to Global Scenario's—Evidence from Oil Price Shocks, Global Financial Crisis and COVID-19

Submitted:

30 December 2025

Posted:

01 January 2026

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Abstract
India, a major emerging economy has historically been deeply affected by global economic shocks. Understanding how its key economic factors such as Index of industrial production, wholesale prices, exchange rates and oil prices respond to these events is crucial for the nation's stability. This research aims to analyse India's macroeconomic responses to these three significant global shocks such as Financial crises 2008, recurring oil price shocks and Covid-19 pandemic. Using monthly data from 1993 to 2024, this study employs co-integration tests for long-term linkages and a VECM for short-term dynamics (including IRF and FEVD). Quantile regression uncovers asymmetric crisis effects, whereas ARCH–GARCH models are employed to assess volatility persistence. The findings show long-term equilibrium linkages with significant error-correction. Further, oil price shocks affect inflation and industrial output through exchange rate adjustments. Quantile regression reveals intensified asymmetric effects at distribution extremes whereas Volatility analysis confirms clustering, with structural breaks identified during the Global Financial Crisis and COVID-19. It can be concluded that India's macroeconomic system is externally vulnerable but demonstrates partial resilience. Policy recommendations from this study includes building strategic oil reserves, adopting currency-oil hedging and enhancing overall crisis preparedness so as to achieve macroeconomic stability.
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