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Ukraine, Gaza, and India: Economic Impacts and Outlook



  Nov 01, 2023

Ukraine and Gaza



The Economic Impact of Global Conflicts on India: A Comprehensive Overview

Summary:

Recent global conflicts, such as the Russia-Ukraine war and the Israel-Hamas conflict, have had widespread economic ramifications. India, as a major importer of crude oil and an emerging market, is not immune to these disruptions. Key areas of concern for India include inflation, fuel prices, and international trade dynamics.

Inflation Pressure:

Retail Inflation: Currently at 5.02% but may rise due to high fuel and commodity prices.

Wholesale Inflation: More susceptible to price shocks in oil and commodities.

Core Inflation: Remains under control, standing at 4.6% in September.

Fuel Prices:

Affordability: Directly linked to the availability of crude oil in international markets.

Sustainability: India's focus on green energy transition has not waned.

International Trade:

Current Account Deficit (CAD): Could rise to 1.6% of the GDP if Brent oil prices reach $90 per barrel.

Exchange Rate: A 10% jump in oil prices can depreciate the rupee.

Economic Growth:

IMF Outlook: Global growth is projected at 3% for 2023, potentially slowing to 2.9% in 2024.

Impact on India: The economic growth rate can be negatively impacted by about 15 basis points, according to RBI.

Geopolitical Concerns:

Trade Relations: Potential impact on India’s trade surplus with Israel and its Middle-East-Europe Economic Corridor.

Emerging Markets: Fuel prices and supply chain disruptions are significant worries.

Policy Decisions:

Short-term vs. Long-term: India needs to navigate between immediate concerns and long-term strategies, especially in an election year.

Oil Marketing Companies: May have to absorb losses if the government decides against raising fuel prices.

SRIRAM’s


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