In past decades, the macroeconomic stability of India has been tested repeatedly by major global disruptions, including oil price shocks, the 2008 global financial crisis and the COVID-19 pandemic. Analysing how macroeconomic variables respond to these shocks is essential for evaluating external vulnerability and policy resilience in emerging economies. Our study provides a comprehensive empirical investigation of the dynamic responses of wholesale price inflation, industrial output, oil prices and exchange rates in India by employing monthly data from January 1993 to December 2024. To examine long-run equilibrium relationships along with short-run adjustment dynamics, the present study employs co-integration analysis within a Vector Error Correction Model (VECM) framework. Further, we applied impulse response functions and forecast error variance decomposition to track volatility spillover mechanisms. Quantile regression and ARCH–GARCH models were further estimated to account for distributional heterogeneity and time-varying volatility. The findings of our study suggested stable long-run linkages among the selected variables, where oil price shocks emerged as a key external source of macroeconomic fluctuations. Short-run dynamics suggested that shocks in oil prices are transmitted primarily through inflation and exchange rate channels and then affect industrial output. Distributional estimates revealed the effects were stronger during stress periods, indicating tail risks that were not captured by the mean-based models. Lastly, volatility analysis confirmed persistent clustering, especially during phases of crisis. Overall, the findings suggest that India’s macroeconomic system remains externally sensitive, with adjustment mechanisms that operate gradually but come under strain during global disruptions. These results underscore the importance of energy risk management and crisis-responsive macroeconomic stabilisation policies.
Bhardwaj et al. (Fri,) studied this question.