India braces for economic strain as West Asia conflict escalates
Subscribe to enjoy similar stories. India could brace for trade and stock market shocks, costlier crude and shipping, fewer jobs for Indians in West Asia and a drag on growth momentum, experts said, as Iran’s direct attack on Israel and the latter’s missile strikes on neighbouring Lebanon spark fears of an all-out conflict. A vulnerable point for the Indian economy, which imports nearly 85% of its crude oil requirement, is energy security, but experts remained optimistic about global powers stepping in to contain the crisis and limit damage to trade and economy.
With crude oil output of almost three million barrels per day, Iran is a major oil producer and exporter. A fifth of the world’s crude oil supply, and 60% of Indian crude oil supply passes through the Strait of Hormuz. A conflict in the region could push up oil prices sharply from the present level of about $72 per barrel to a level of $80, said Manoranjan Sharma, chief economist at Infomerics Ratings and former chief economist at Canara Bank.
This could worsen India’s trade deficit, current account deficit and fiscal deficit. The stock market in India could suffer because of the overarching negative sentiment and a discernible element of froth and bubble, Sharma added. Global GDP and trade growth will be the main casualty, said Devendra Pant, chief economist, India Ratings & Research.
The conflict will have an impact not only on India’s current account balance but also on the balance of payment, said Pant, adding that India’s strong foreign exchagne reserve (of over $690 billion as of 20 September) will certainly be helpful. Exporters believe that if Iran’s ports are attacked, outbound essential commodity supplies could get hit. Iran has several ports given its
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