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CareEdge Report Warns West Asia Crisis May Impact India’s Economy
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Author: TEXTILE VALUE CHAIN
CareEdge Ratings has released a thematic report analysing the macroeconomic implications of the ongoing West Asia crisis. The report highlights potential risks to India’s trade, inflation, fiscal balance, and growth if global crude oil prices rise significantly due to disruptions in the region.
Key Highlights:
- Flows through the Strait of Hormuz accounts for around 20% of the global oil and LNG supply
- About 40% of India’s crude oil imports are transported through the strait.
- Even with some diversification, India’s share of imports from West Asia remains high at 51%.
- India’s goods exports to West Asian countries account for 15% of total exports and could get adversely impacted.
- There is risk of Remittances from the gulf countries that accounts for over one-third of India’s total remittances, getting disrupted.
- We feel that India’s CAD to GDP ratio could rise above 2.2% in case prices rise above $100/bbl.
- OMCs are likely to pass through some of the increase, if crude oil prices remain above $90/bbl.
- We feel that retail inflation could rise above 5.1% in FY27, if the price of crude remains above $100/bbl.
- Fiscal pressure will depend on the extent of fuel tax adjustments, change in subsidy allocations and the impact on overall tax revenue collection. We expect the 10-yr G-sec yield could rise above 7% if oil stays sustainably above $100/bbl in FY27.
- INR may go higher to 93-95/$ if the price of oil averages between $100-120/bbl in FY27.
- We feel the GDP growth could fall below 6.5% in FY27, if oil prices average $100-120/bbl.
Read Full Report here:
https://tvc.s3.ap-south-1.amazonaws.com/Macroeconomic_Impact_of_West_Asia_Crisis.pdf