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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'MCC-Modi's Code of Campaigning': Cong's dig at EC
New Delhi (PTI): Ahead of the assembly polls schedule announcement by the Election Commission, the Congress on Sunday took a swipe, saying since 2014 the MCC has come to stand for "Modi's Code of Campaigning which will be full of defamation, abuses, intimidation, fear-mongering, and spreading the virus of lies."
The opposition party also claimed that the poll schedule announcement "would have been given the go-ahead by the G2, since G1 would have completed this round of inaugurations, ribbon-cuttings, flag-offs, and launches".
The Congress frequently uses the term 'G2' to take swipes at Prime Minister Narendra Modi and Home Minister Amit Shah, who are both from Gujarat.
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In a post on X, Congress general secretary in-charge communications Jairam Ramesh said, "The Election Commission will announce the schedule for the 2026 assembly elections at 4 PM today. It would have been given the go-ahead by the G2, since G1 would have completed this round of inaugurations, ribbon-cuttings, flag-offs, and launches."
"The Election Commission's Model Code of Conduct (MCC) will soon come into effect. But since 2014 this has come to stand for Modi's Code of Campaigning which will be full of defamation, abuses, intimidation, fear-mongering, and spreading the virus of lies," Ramesh said.
The MCC is a set of conventions agreed upon by all stakeholders during the elections. Its objective is to keep campaigning, polling and counting orderly, clean and peaceful and check any abuse of state machinery and finances by the party in power.
The Election Commission will announce dates for assembly polls in Assam, Tamil Nadu, Kerala, West Bengal and Puducherry on Sunday evening.
The terms of these legislative assemblies are ending on different dates in May and June.
Final electoral rolls of the four states and the Union territory of Puducherry have been published as part of the Special Intensive Revision (SIR) of voters' list.
