This is a new turn in the global commodity situation, which would impact on all countries, many benefitting from the steep fall in oil prices to improve their economic fundamentals while oil exporters, (mainly OPEC) would be the losers, Russia specially with its growth already flat and severely constrained by financial sanctions by US and other western nations.

The windfall helped India to effect fuel price deregulation further with subsidy cuts, taking advantage of an already slowing inflation, and to reduce the fiscal deficit. For the global economy, still struggling with an uneven pace of post-crisis recovery, growth had been projected to improve overall in 2015 in terms of both output and trade.

But, apart from other risks such as financial market volatility and geo-political, the changing oil scenario might work both ways. Positively, it gives consumers more cash to spend on other things and create demand and also reduce costs for business. The automobile and aircraft industries would be the major gainers.

The sudden fall in prices - and this continues amid speculation that it could go down to 40 dollars in coming weeks - would further lower inflation and good for developing countries. It is good for major economies - US, Europe and Japan - though they are on different growth trajectories.

While the US economy is on a bounce, growing by around 2.5 per cent in 2014 and looks to cross 3 per cent in 2015, on the back of rising investment, with its shale oil boom and falling unemployment rates, the euro-zone and Japan are mired in negligible growth and face deflationary fears. The central bankers in the advanced economies including USA, however, face the problem of raising the underlying inflation rates - well below one per cent in EU - to their targeted 2 per cent.

Falling oil prices and lowering demand have triggered growth concerns leading to staggering drops consecutively in the major global market indices in the second week of December, with energy shares taking the hit. Already, some of the oil companies in US are cutting down investments on offshore projects and retrenching staff. The relentless downslide in the oil market is also due to the Nov.27 decision of OPEC not to cut production and perhaps even allow prices to drift to a level that USA finds its shale oil extraction uneconomic.

With a demand decline, induced by slowdown of some major and developing economies including China, market analysts see oil producers preferring to reduce amount of oil that they take out of the ground and wait for better times. The producers have to weigh the lower future demand and increased future supply. Other factors that are at work in the world's biggest economy (USA) are increased fuel efficiency and growing consumption of solar power and other non-oil energy sources.

As a corollary, it is assumed the future price of oil will be lower than industry participants expected until recently unless the fundamentals of supply and demand change. In USA, relatively better-placed than all other advanced economies, lower retail prices by one dollar a gallon amounts to transferring savings to households which spend on other goods and services, thus giving added boost to economic growth. Iran and Russia are among major oil exporters whose earnings have gone down affecting their spending including massive transfer programmes.

In its report on World Economic Situation and Prospects 2015, UN notes the upcoming US interest rate increases (expected from mid-2015 but may also be advanced to some extent), the euro area fragility (low growth and deflationary trends), a further slowdown in developing economies and geopolitical conflicts pose major concerns for global economic outlook.

UN projections for the world economy are for global output, 2.6 per cent in 2014 but is set to improve marginally to 3.1 per cent in 2015 and 3.3 per cent in 2016. (These correspond to 3.5 and 3.8 per cent in 2015 and 2016 in PPP weights IMF adopts).

India's growth rate is expected to rise from 5.4 per cent in 2014 to 5.9 per cent in 2015 and 6.3 per cent in 2016 while China's growth will decline from 7.3 per cent in 2014 to 7 and 6.8 per cent over the next two years. While growth rates in developing countries have diverged more during 2014, , East Asia, including China, experienced only a mild slowdown while India led South Asia to a moderate uptick.

East Asia will remain the fastest-growing region, and is projected to see stable growth of 6.1 per cent in 2015 and 6.0 per cent in 2016. Economic growth in South Asia is set to gradually pick up from 4.9 per cent in 2014 to 5.4 and 5.7 per cent in 2015 and 2016.

The US economy is expected to improve in 2015-2016, with GDP projected to expand by 2.8 and 3.1 per cent, respectively. The impressive turnaround in USA toward pre-crisis annual average of 3 per cent, in the last six months, is coupled with uninterrupted job growth adding over 10.5 million jobs in four and half years. The unemployment rate is now below 6 per cent down from the recession-induced double-digit level of 2009.

Globally, post-crisis recovery has remained slow and uneven for five years, the slowdown lately extending to the hitherto fastest-growing China, but a clear pick-up is now visible in India's growth momentum. These two fast-growing Asian majors have been among the principal drivers of global growth along with some of the major advanced nations, notably the United States.

Overall, US in a 'strong economic position', having put more people back to work than Europe, Japan, and the rest of the advanced world combined, as President Obama recently told business leaders. US manufacturing is growing, the auto industry reporting record sales, exports are rising, and the shale revolution in oil/gas is making US energy-.independent, turning US a net exporter of oil/gas.

A major weakness in the macroeconomic picture remains the employment situation, as GDP growth continued to be subdued and, and unable to create sufficient number of productive jobs. Unemployment remains elevated in developed economies with wage levels adversely affected. In developing economies, despite slower job growth, rates of unemployment rates have remained relatively stable since 2013. (IPA Service)