The Asian Tribune
editor@asiantribune.net
Indian economy is facing multiple challenges and the ongoing war between Iran and US-Israel has made it even more tough.
The government has tried to manage the crisis so far but the situation is complex and the mounting pain has to be ultimately passed on to the citizens.
Due to disruption in supplies owing to the closure of the Strait of Hormuz, India that relies heavily on the route for its gas and crude imports, is facing a host of issues.
Till a few months ago, India was posting growth in GDP. But the war led to oil shock and India’s huge dependence on the foreign countries, particularly, Gulf region and this route for its energy needs, affected the nation and it has brought a fresh challenge for the policy makers in the country.
The rupee has hit another low and the foreign investors have pulled up a huge sum from the Indian equities in the recent months.
A huge amount on crude and petroleum products, nearly 22% of its total imports. As the oil and gas prices go up, the import bill too has exploded.
This tremendous rise in cost of energy, has created a major issue. Neither getting Iranian barrels, nor Russian, is a major pain. If the Strait of Hormuz remains close for more time, the crisis would worsen and the petrol prices will be increased again.
The seriousness of the issue can be understood by the figures, as majority of India’s households use LPG for cooking the food. The entire hotel industry is also dependent on it. The imports are necessary and most of it, comes through the Strait of Hormuz.
After people quit wood or kerosene and started using the LPG, it becomes difficult for them to go back to the old alternatives.
The call to citizens to stop buying gold and avoid foreign travels, suggest how much the government is worried due to the ongoing situation. The growth story is now dented. Kitchens are stressed and the rupee is under pressure.
Geopolitical room for manoeuvre is narrow. Till sometime ago, India claimed that it was the fourth biggest economy.
Perhaps, it was a razor thin margin, a slight difference between India and Japan. However, right now the country is at the sixth spot.
The economy is growing but there are structural weaknesses in this growth story and they have become more visible due to the ongoing war.
Unemployment is growing and the figures don’t tell the real picture, as the labour survey terms anyone working temporarily for even a short time, as employed. This is not the exact or true scenario. Jobs are less and households are stressed.
