As the fresh US-Iran escalation unfolds and concerns around the Strait of Hormuz mount, oil prices surge and stock markets remain volatile. What does this mean for India? Senior Economist, Mitali Nikore decodes the impact in an exclusive interaction with Times Now Digital.
Q. Mitali, what does the latest escalation mean for India’s fuel rates, inflation in the near term?
A. So, Sakshi, I think when we look at the way the Government of India has managed this situation, it has managed to protect the economy and the pass-through of fuel prices into inflation quite pragmatically. Because just last week, a lot of people were questioning that why haven’t the fuel rates been brought down? And the Ministry said that they will take a wait and watch approach, and we are now seeing that they’ve been proven right because oil prices have escalated again. Indian fuel prices were only increased once sometime in late April, we’re now seeing the market adjusting to it. We’re seeing inflation has also calmed down now. Yes, it’s shot up, but it’s coming down now. It’s not shooting up because it’s not like a continuous cycle of increase. So we’re starting to see very pragmatic management of the retail fuel prices by the Government even as the global crude rate keeps fluctuating.
Q. Mitali, in the long run, is India better prepared than when the West Asia conflict first began and the previous oil shocks that the world had witnessed?
A. Absolutely, Sakshi. There’s no doubt about it because the management is being done on both sides, at the demand side and the supply side. So when we look at the supply side, nearly half of our imports of crude came from Russia in June. We’re looking at diversifying away from just one market to many different suppliers. We have long term agreements signed now with several countries in Latin America as well as in Africa. So that helps us diversify on the supply side and bring down the cost of our fuel consumption basket, vis-a-vis the global price. On the other hand, at the demand side, we’ve seen the Delhi EV policy came out last week. We’ve seen that the ethanol blending programme has been rolled out nationwide. We’re also seeing the rooftop solar programme taking off nationwide, so a lot of industrial fuel and industrial energy also coming from renewable sources. Slowly but surely, that transition is taking place. So on both sides, I think we’re much better prepared now.
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