Rising geopolitical tensions, especially in West Asia, are impacting India’s economy by increasing oil prices, weakening the rupee, and creating fiscal and external sector pressures.

BulletsIn

•  India imports over 85% of its crude oil, making it highly vulnerable to global oil price shocks.
•  Global tensions have pushed crude oil prices significantly higher, affecting inflation and economic stability.
•  A rise in oil prices increases transport and production costs, leading to overall inflation in the economy.
•  The Indian rupee has depreciated to around ₹95 per dollar, increasing import costs.
•  Reserve Bank of India has used forex reserves to manage currency volatility.
•  Foreign exchange reserves declined to about $709 billion due to global uncertainty and capital outflows.
•  Higher oil prices increase subsidy burden on LPG and fertilisers, raising government expenditure.
•  Government often cuts fuel taxes to control inflation, reducing its revenue collection.
•  India’s tax system depends heavily on GST, which is affected when consumption slows during crises.
•  Households face rising expenses and reduced disposable income due to inflation and high energy prices.
•  Private consumption contributes about 61% to GDP, making the economy sensitive to demand shocks.
•  Industrial growth remains uneven, with strong capital sectors but weak labour-intensive sectors.
•  India shows strong GDP growth but also faces rising debt, weak incomes and external vulnerabilities.
•  Experts suggest diversifying energy sources and strengthening domestic demand to reduce vulnerability.