Iran's missile strike on Israel sparks oil price surge, Raises economic concerns for India
A recent ballistic missile strike by Iran on Israel has heightened fears of a broader Middle Eastern conflict, driving crude oil prices up by 4% overnight due to concerns over potential supply disruptions. As oil prices continue to rise, experts are cautioning that India, heavily dependent on energy imports, could face significant economic challenges.
The missile strike followed Israeli military action in Lebanon, including the targeted killing of Hezbollah leader Hassan Nasrallah, escalating fears of wider regional instability. With OPEC+ controlling approximately 40% of the global crude oil supply, the organization's decisions could significantly influence oil prices, potentially impacting emerging economies like India.
Sugandha Sachdeva, Founder of SSWealth Street, explained that for every $10 increase in oil prices, India's inflation typically rises by 0.3%, while the current account deficit (CAD) widens by $12.5 billion, or around 43 basis points (bps) of GDP. "Higher fuel costs lead to increased transportation and production expenses, which ultimately raise the prices of goods and services, squeezing consumer purchasing power," Sachdeva noted.
Jigar Trivedi, Senior Research Analyst at Reliance Securities, echoed these concerns, warning that rising oil prices would result in larger dollar outflows from India, further weakening the rupee. Iran, a key member of OPEC, exports around 1.7 million barrels of oil per day. Its strategic location near the Strait of Hormuz — a vital passage for oil exports from Gulf countries like Saudi Arabia, Qatar, and the UAE — further elevates the risk of global energy supply disruptions as regional tensions escalate.
India is already showing signs of economic strain. The country's manufacturing Purchasing Managers' Index (PMI) fell to an eight-month low in September, while the CAD in Q1 2024 rose slightly to 1.1% of GDP, compared to 1% a year ago, according to Sachdeva. This underscores India's vulnerability to external shocks, such as rising oil prices.
A widening CAD leads to greater outflows of foreign exchange, further devaluing the rupee and making imports more expensive. Although fuel and light account for only 6.84% of India's Consumer Price Index (CPI), sustained oil price increases could push inflation higher, which in August stood just below 4%.
Data from the Petroleum Planning & Analysis Cell (PPAC) revealed that India’s oil import dependency increased to 87.8% in FY24, up from 87.4% in FY23 and 83.8% six years ago. This growing reliance on imported crude makes India highly susceptible to global oil price fluctuations, affecting inflation, the trade deficit, foreign exchange reserves, and the rupee’s value.
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Ajit Pawar wins Baramati battle, defeats nephew Yugendra by more than 1 lakh votes
Baramati, Nov 23: Maharashtra deputy Chief Minister and NCP president Ajit Pawar on Saturday won from his traditional Baramati assembly constituency by defeating his nephew and NCP (SP) candidate Yugendra Pawar by more than one lakh votes.
Ajit, who parted ways with his uncle Sharad Pawar last year and was seeking an eighth term from this family bastion in Pune district, polled 1,81,132 votes while Yugendra Pawar polled 80,233 votes.
Ajit, thus, defeated his younger brother's son by 1,00,899 votes.
Five months ago, Sharad Pawar-led NCP (SP) had triumphed in Baramati in the Lok Sabha elections, with incumbent MP and Sharad Pawar's daughter Supriya Sule defeating Ajit Pawar's wife Sunetra by a margin of 1.5 lakh votes.
Both the NCP factions did not leave a single stone unturned during the assembly campaign, and even Sharad Pawar's wife Pratibha Pawar and Sule's daughter Revati were seen campaigning for Yugendra, while Ajit Pawar brought his mother on stage during his concluding rally in Baramati.
While Sharad Pawar told the people of Baramati that they needed a new leadership, alluding to Yugendra Pawar whom he described as a highly-educated candidate, Ajit Pawar cautioned people not to fall prey to the "emotional pitch" by the senior Pawar.
After Saturday's results, Ajit Pawar, who along with several other NCP legislators sided with the BJP-Shiv Sena government in 2023, could claim to be the real political heir of his estranged uncle who founded the NCP in 1999.
Sunetra Pawar, now a Rajya Sabha member, thanked the people of Baramati for reposing their faith once again in `Dada' (elder brother in Marathi, as Ajit is fondly called).
