Fears loom over oil price, possible inflation with the war

New Delhi: With the war raging in Eastern Europe, all is not well on fiscal front for India.

After Putin's war cry, the ripple effect was palatable elsewhere in the world with stocks nose-diving.

As for India, crude oil prices have gone through the roof recording over $100 a barrel, alongside negative bearing on stock markets.

Experts stay finger crossed even in the face of inflation risks looming over the nation, according to reports.

In the worrying situation, PM Narendra Modi met Finance Minister Nirmala Sitharaman and other senior government functionaries Thursday, according to Indian Express. Authorities must be fully alive to the possible negative fiscal situation from the war.

Remember, India was recuperating on fiscal front following covid situation, and life was back in normalcy showing a resurgent spirit.

Spiraling oil prices could have negative impact on this nascent change in the economy, experts believe.

With surging crude oil prices, the most immediate concern is on the price front – India's inflation rate is expected to surge higher than most official calculations, the report said.

Also, plummeting stock markets may put a spanner on its budgeted disinvestment push, according to the report.

"The impact on India will be two-fold: higher crude oil prices will keep CPI inflation higher for longer, obliging the RBI to raise rates more than the two hikes we expected in Aug-Dec'22 — unless the government sharply cuts excise duties on petrol and diesel to contain fuel inflation; via the trade route, given that the EU is the biggest market for India's exports: supply disruptions to the EU are also likely to generate greater demand for steel, engineering goods, etc., of which India is an alternate supplier, so the factors that caused India's exports to outperform the world in 2021 will continue to hold in 2022, allowing exports to remain robust," the report quoted researchers at ICICI Securities.

With military action in Eastern Europe, the Bombay Stock Exchange's Sensitive Index, Sensex, crashed over 2,700 points. This is the biggest single-day fall in about two years. Along with this plummeting, Nifty went down 815.30 points or 4.78 per cent to end at 16,247.95.

Despite tensions out there, India's trade with Russia continues without much impact. But more wide ranging sanctions on Russia could spell problems affecting bilateral trades.

Over the years, Russia has become India's 25 th largest trading partner. India's exports to Russia stands at $ 2.5 billion while importing from Russia is at $6.9 billion. India's key exports to Russia include mobile phones and pharmaceuticals, while importing from Russia crude oil, coal and diamonds.

Snapping ties with Ukraine could be equally difficult for India. India's exports to Ukraine most recently stood at about $372 million. India's imports recorded about $2.0 billion buying sunflower oil and urea from Ukraine.