When Chinese Yuan battles US Dollar, here's how your fuel, EMI suffer"
You fill petrol in your bike. You buy cooking gas. You pay your EMI. Have you ever thought that a war happening thousands of kilometres away in the Middle East can directly affect all three? It sounds dramatic, but it is completely true. Let us understand what is happening right now and why it matters to every one of us.
Iran controls one of the most important waterways in the world — the Strait of Hormuz. A huge amount of the world's oil passes through this narrow channel every single day. Even during the current tensions with the US and Israel, Iran is still exporting around 1.3 to 1.4 million barrels of oil every day. Most of it goes to China, where small refineries are quietly buying it — not in US dollars, but in Chinese yuan. This is a very important detail. Why? Because for decades, oil has always been bought and sold in US dollars. This arrangement has kept the dollar powerful and relevant globally.
Think of it this way. Imagine your colony has only one shopkeeper, and every household must buy their groceries from him. That shopkeeper will always remain powerful no matter what. America is that shopkeeper. Countries need dollars to buy oil, so they always need to hold dollars. This is why the dollar stays strong even when America itself is not doing great economically.
Now China is saying — why must we always use dollars? China has shifted nearly half of its trade to yuan. And Iran, which has some of the cheapest oil in the world, is openly questioning the US-backed alliances in the region. Together, these two are slowly trying to challenge the dollar's grip on global trade. This is no longer just a military conflict. It has become an oil war and a currency war at the same time.
Now what does all this mean for India?
India imports most of its oil. When global tensions rise, oil prices go up. India has to spend more dollars to buy that oil. More dollars going out means fewer dollars coming into India. This puts pressure on the Indian rupee and its value falls. A falling rupee is not just a number on a screen. It means petrol becomes costlier. Diesel becomes costlier. Anything that is imported — from electronics to medicines — becomes expensive. That cost lands directly in your pocket.
To protect the rupee, the Reserve Bank of India steps in. RBI sells dollars from its reserves to buy rupees back, which helps support the rupee's value. But here is the problem. When RBI sells dollars, it takes rupees out of the market, and suddenly there is less money flowing around for banks to lend. So RBI then buys government bonds from banks to push money back into the system.
Here is a simple example. Suppose a bank is holding a government bond worth ₹100. RBI buys that bond and gives the bank ₹100 in cash. Now the bank has cash to lend to people and businesses again. This balancing act goes on continuously behind the scenes.
But this juggling cannot go on forever. There is a limit to India's dollar reserves. If the situation does not improve, the rupee may fall further. And if RBI tries to stop the fall by raising interest rates, your home loan EMI goes up, businesses find it expensive to borrow, and the economy slows down. It is a difficult situation with no easy answer.
There is one more option RBI can use — limiting how much money investors and companies send abroad. This is called capital control. It is like telling people in your house — do not spend money outside, spend it here only. It helps reduce the outflow of dollars. But it also sends a very bad signal. Foreign investors may think India is in serious trouble and stop bringing money in. So this step is used only in extreme situations.
Right now, the war situation is still evolving. No one can predict exactly how things will turn out. Will oil prices stabilise? Will the dollar and yuan clash openly? Will Iran escalate further? These are all open questions.
What experts call "black swan" events — meaning big, unexpected shocks that no one saw coming — are happening more and more frequently in today's world. The 2008 financial crisis was one. COVID was one. This Middle East situation could become one too.
The message for all of us is simple. The world is deeply connected today. A missile fired in the Gulf can increase the price of your dal and petrol within weeks. Staying informed is not just for economists and analysts. It is for everyone who earns, spends, and dreams of a better life.
(Girish Linganna is an award-winning science communicator and a Defence, Aerospace & Geopolitical Analyst. He is the Managing Director of ADD Engineering Components India Pvt. Ltd., a subsidiary of ADD Engineering GmbH, Germany.)
Disclaimer: The views and opinions expressed in this article are solely those of the author. They do not necessarily reflect the views, policies, or position of the publication, its editors, or its management. The publication is not responsible for the accuracy of any information, statements, or opinions presented in this piece.
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Fully confident of winning bypolls to 2 Assembly constituencies in Karnataka: CM Siddaramaiah
Davangere (Karnataka) (PTI): Karnataka Chief Minister Siddaramaiah on Monday asserted that he was one hundred per cent confident that Congress will win by-polls to two Assembly Constituencies in the state, claiming the BJP will face defeat, similar to what they experienced in earlier byelections.
He also played down the disgruntlement among the other ticket aspirants in the Congress, saying that everyone will be convinced and come together to ensure the party's victory.
Bypolls for the Bagalkot and Davanagere South Assembly constituencies will be held on April 9. The polls were necessitated following the deaths of senior Congress MLAs H Y Meti and Shamanur Shivashankarappa, respectively.
"I'm one hundred per cent confident that we will win both seats. BJP may claim that they will win, but where have they won? They had made similar claims in the previous bypolls, didn't we defeat sons of former CMs Basavaraj Bommai and H D Kumaraswamy?" Siddaramaiah asked in response to a question.
Speaking to reporters here, he said the BJP may claim things, but the Congress government has fulfilled its promises and walked the talk by implementing five guarantee schemes.
"People of the state are in our (Congress) favour. We have proved it in the previous byelections. People, including Dalits, backward class people, poor, farmers and minorities -- all of them are with us," he added.
When questioned about claims by some BJP leaders that the bypoll results would indicate the outcome of the 2028 Assembly polls in the state, the CM asked, "When they won't win, what indicator is that?"
"We are in power, we won three by-elections earlier, and I'm confident that we will win these by-elections too," he added.
Congress in November 2024 had swept the by-polls to three Assembly constituencies -- Sandur, Shiggaon and Channapatna.
Responding to a question, Siddaramaiah claimed that the BJP will face defeat in all four states -- Assam, Kerala, Tamil Nadu, West Bengal, and the union territory of Puducherry -- which are going for polls.
After several rounds of discussion amid stiff competition for the party tickets, Congress on Sunday announced Umesh Meti and Samarth Mallikarjun as the party candidates for Assembly by-polls to Bagalkot and Davangere South assembly constituencies, respectively.
The Congress gave tickets to family members of the late legislators in both constituencies. While Umesh Meti is the son of H Y Meti, Samarth Mallikarjun is the grandson of Shamanur Shivashankarappa.
Expressing confidence that the disgruntlement within the party, following candidate selection, especially in the Davangere South constituency, will be resolved, the CM said, adding that the candidate selection was a unanimous decision by the party.
Pointing out that ticket aspirant Sadiq Pailwan has announced he will contest as a rebel in Davangere South, he said, "We will try and convince him."
When asked whether Muslims would be compensated, Siddaramaiah said, "Nothing has been discussed, but we will try to give representation to minorities."
There was a strong demand from Muslims for the Davangere South ticket, as the community has a significant presence in the constituency. Some factions within Congress had opposed giving the ticket to the Shamanur family.
