Yesterday, oil costs spiked previous $100 for the primary time since 2014 and the Sensex noticed its fourth largest single-day slide in historical past. These are solely two of the early, clear and plentiful indicators of the financial spiral set off by Russia’s invasion of Ukraine. For an Indian economic system climbing to restoration because the pandemic’s third wave fades out right here, this disaster will imply painful selections.
India accounts for lower than 1% share of Russia’s crude oil exports. But Russia is the world’s second-largest oil producer at the same time as India imports over 80% of its oil, albeit principally from different nations. So if world oil costs stay elevated and much more so if world oil provide is disrupted if the disaster persists, this can problem every little thing from the federal government’s Budget calculations to RBI’s capability to stabilize inflation.
Given the weak economic system and demand, the central financial institution might want to sort out the inflation problem in heterodox reasonably than textbook methods. As for the federal government, even earlier than yesterday’s invasion, FM Nirmala Sitharaman acknowledged that rising crude oil costs amid escalating Ukraine-Russia tensions pose a risk to India’s monetary stability. Global headwinds will solely worsen if and when stronger sanctions are put in place towards Russia. Government should be on its toes to answer a fast-changing quagmire.
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