Rising Crude Oil Prices Pose a Major Economic Crisis for India; Price Per Barrel Could Reach $140. Rising prices of crude oil is a big economic crisis for India, price per barrel can reach ₹ 140 dollars.

The ongoing war and deepening geopolitical tensions in West Asia pose a major threat not only to security but also to the global economy. Gita Gopinath, the first Deputy Managing Director of the International Monetary Fund (IMF) has issued a serious warning regarding India’s economy. He has clarified that if this conflict continues till the coming month of June, then the prices of crude oil in the global market may reach a dangerous level of $140 per barrel.

Why is this ‘supply shock’ worrying for India?

India imports a large part of its total energy needs from the Middle East. According to Geeta Gopinath, it is not just a matter of increase in oil prices, but now a situation like ‘supply shock’ is arising.

• Threat to Hormuz Strait: If the supply chain between Iran and other countries involved in the conflict is disrupted, it will directly impact the availability of not only oil, but also LPG, LNG and fertilizer.

• Supply Restoration Time: Once the supply chain is broken, it may take at least 2 to 3 months to become completely normal, which will be fatal for the economy.

How will it affect the common man’s pocket?

If the price of crude oil increases from $110 to $140 per barrel, its adverse consequences will be immediately visible in India:

1. Transport and manufacturing expensive: Due to increase in prices of petrol and diesel, truck fares will increase, which will make logistics expensive and ultimately the prices of daily essentials (inflation) will increase in the market.

2. Cost of Farming: The cost of agricultural production will increase due to diesel and fertilizers used in agriculture becoming expensive.

3. Limit of Government: Geeta Gopinath has clearly said that the government will not be able to provide subsidy or relief every time the prices increase. A large part of this will have to be borne by the companies and the public themselves, which directly means that prices at petrol pumps are certain to increase.

Rupee’s decline and the role of RBI

Geeta Gopinath has also given a balanced opinion on the discussions about the rupee reaching 97 against the dollar and going up to 100 level:

• Means of balance: He believes that if the rupee weakens, it acts like an ‘automatic stabilizer’ in reducing the country’s import bill by making imports expensive.

• Foreign exchange reserves: He has warned that if the government and the Reserve Bank (RBI) intervene excessively in the market to save the rupee, then unnecessary pressure on the country’s foreign exchange reserves may increase.

Is India safe?

Amidst the depressing atmosphere, Geeta Gopinath has also advised to avoid panic:

• Strong domestic demand: India’s internal demand is still very strong.

• Spending on Infrastructure: The government’s increasing spending on infrastructure projects is supporting the economy.

• Forex Reserve: India’s foreign exchange reserves are still in a strong position.