Hormuz Strait Crisis: Economic Challenge Facing India; Impact of oil and gas price hike on inflation?

• Pressure on Indian economy due to oil and gas price hike
• Petrol-diesel rates likely to increase
• Billions of dollars per month due to inflation

Hormuz Strait Crisis: The current geopolitical tensions in West Asia have created a financial crisis for India. The sharp rise in crude oil and natural gas prices in the international market is expected to have a direct impact on the country’s current account deficit and inflation. Analysts are of the view that this increase in energy prices has hit the economy. Crude oil prices have risen from $66 per barrel to nearly $120 per barrel.

Natural Gas (NGG): Rates have more than doubled to $24-25 per British thermal unit. Direct impact on the economy According to Anuj Sethi, senior director at Crisil Ratings, India imports 85% of its crude oil and 50% of its natural gas requirements. This dependence can lead to additional foreign exchange payments of 7 to 8 billion dollars per month.

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Current Account Deficit (CAD): According to ICRA Chief Economist Aditi Nair, for every $10 rise in crude oil prices, CAD can increase by 1.9% to 2.2% of GDP. Wholesale Inflation A 10 percent increase in oil prices may increase wholesale inflation by 0.8 to 1 percent. Warnings for the Future Retail prices may come under pressure. Maulik Patel, head of research at Equirus Securities, warned that if the Strait of Hormuz (Strait of Hormuz) prices may rise significantly above current levels if supply is disrupted. In such a scenario, oil companies will find it impossible to maintain stable prices for long and will have to increase retail prices (petrol and diesel).

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Meanwhile, experts have also warned about the future situation. According to Maulik Patel, head of research at Equirus Securities, if oil supply through the Strait of Hormuz is disrupted, crude oil prices could rise further from current levels. In such a scenario, it will be difficult for oil companies to keep fuel prices stable for long. Therefore, the possibility of an increase in the retail prices of petrol and diesel in the future cannot be ruled out. Experts are of the opinion that rising energy prices, rising inflation and increased import costs could put pressure on India’s economy.