One significant risk for India, given its status as a significant importer of commodities, arises from the slightly disappointing monsoon season. This situation introduces the potential for inflationary pressures stemming from this factor. Additionally, the escalating oil prices pose a threat by potentially leading to a current account deficit and other associated issues. Consequently, India faces its own set of vulnerabilities, indicating that it is not entirely insulated from the influence of global factors.
Sharing his apprehensions about the potential risks that India could face as part of these global factors in an interview with CNBC-TV18, Arvind Sanger, Managing Partner at Geosphere Capital Management, said that higher inflation and surging crude oil prices are two imminent risks for India's economy.
He said, “India is on a weak wicket as a significant commodity importer, and (in addition) it had a slightly worse monsoon. So, you have some embedded potential risks for inflationary forces coming from there, plus you have the oil price which will cause a current account deficit and other problems. Therefore, India has its own risks which it is not completely immune to what is going on in
global forces.”
One of the primary concerns raised by Sanger is the impact of rising inflation on India's economy. Inflation has been a global concern, and its effects are felt on various fronts, from the prices of everyday goods to the cost of borrowing.
However, Sanjiv Puri, CMD of
ITC Ltd, the consumer goods-to-hospitality-to-agriculture conglomerate, recently commented that although India's inflation rate remains higher than desired, it has steadily decreased from previous levels.
Additionally, Sanger pointed to the volatility in crude oil prices as a cause for concern. India, like many other nations, relies heavily on oil imports to meet its energy demands. The recent spikes in global crude oil prices have the potential to strain India's fiscal position, exacerbating its current account deficit and putting pressure on government finances.
Oil prices rose in early Asian trade on Thursday after surging to the highest settlement in 2023 in the previous session as a steep drop in US crude stocks added to worries about tight global supplies.
Brent crude futures climbed 16 cents to $96.71 a barrel by 0001 GMT. US West Texas Intermediate crude futures (WTI) rose 20 cents to $93.88.
Sanger emphasised that these risks are interconnected. Higher
crude oil prices can contribute to inflationary pressures, making it essential for policymakers to carefully navigate these challenges.
(with input from Reuters)
For more details, watch the accompanying video
(Edited by : C H Unnikrishnan)
First Published: Sept 28, 2023 2:33 PM IST