India moves to protect economy as Iran tensions expose risks

The worsening conflict in the Middle East disrupted oil and gas supplies. Read more at straitstimes.com.

India stepped up plans to shield its economy as the worsening conflict in the Middle East disrupted oil and gas supplies and put millions of Indian workers in the region at risk.

The government on March 3 set up a panel to monitor risks and keep exports and imports running smoothly in the face of disruptions. Officials also reviewed petroleum reserves to ensure adequate buffer stocks and directed state-run refiners to diversify sources of crude beyond West Asia.

The Reserve Bank of India (RBI) stepped up surveillance of the currency market, and traders said on March 4 that the central bank intervened to curb volatility after the rupee plunged to a record low.

India is one of the more vulnerable economies in Asia to the fallout from the US-Israeli war against Iran. India imports about 90 per cent of its oil, with about half of that coming from Persian Gulf countries, where trade through the key Strait of Hormuz has virtually come to a halt.

Crude prices have surged around 15 per cent since the attacks on Iran over the weekend, which economists say will pose serious risks to India’s current account, currency and inflation if the conflicts persists.  

“If there is an escalation and this continues for a relatively longer time, it could have a severe implication in terms of the pricing of oil,” said Yes Bank chief economist Indranil Pan. “And that would be negative in terms of the current account and balance of payments.”