India’s External Balance Under Pressure: Oil Shocks, West Asia Tensions, and Trade Trends in FY26
🔍 Geopolitical Tensions Threaten India’s Fiscal Stability As tensions between Iran and Israel escalate, the economic fallout is becoming more visible—particularly for energy-import-dependent countries like India. A recent report by ICRA has flagged that if crude oil prices jump by $10/barrel amid West Asia instability, India’s Current Account Deficit (CAD) could widen by 0.3% of GDP . This would mean a jump of $13–14 billion in net oil imports, putting pressure on the country’s balance of payments. Currently, ICRA estimates India's CAD for FY26 at 1.2–1.3% of GDP , assuming oil remains around $70–75 per barrel . However, if prices move into the $80–90 range , the CAD could hit 1.5–1.6% , significantly impacting the rupee’s stability against the US dollar. 🚢 Strait of Hormuz: A Critical Choke Point The biggest concern? Iran’s warning to close the Strait of Hormuz —a crucial maritime route through which 20% of the world’s crude and LNG supplies are shipped. India imports...