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.
Let the Truth be known. If you read VB and like VB, please be a VB Supporter and Help us deliver the Truth to one and all.
Pakistan reports two more polio cases; Total tally now 52
ISLAMABAD: At least two more cases of poliovirus were reported in Pakistan, taking the number of infections to 52 so far this year, a report said on Friday.
“The Regional Reference Laboratory for Polio Eradication at the National Institute of Health has confirmed the detection of two more wild poliovirus type 1 (WPV1) cases in Pakistan," an official statement said.
The fresh infections — a boy and a girl — were reported from the Dera Ismail Khan district of Khyber-Pakhtunkhwa province.
“Genetic sequencing of the samples collected from the children is underway," the statement read. Dera Ismail Khan, one of the seven polio-endemic districts of southern Khyber Pakhtunkhwa province, has reported five polio cases so far this year.
Of the 52 cases in the country this year, 24 are from Balochistan, 13 from Sindh, 13 from Khyber Pakhtunkhwa, and one each from Punjab and Islamabad.
There is no cure for polio. Only multiple doses of the oral polio vaccine and completion of the routine vaccination schedule for all children under the age of five can keep them protected.
