India's economic and energy security challenges from the Iran war (with Haslinda Amin)

Asks how much is at stake for India's economy, referencing the finance minister's three Fs: fuel, fertilizer, forex.

Haslinda Amin

Deepika Saraswat

The Iran war has been like an economic war for India. High import dependency for crude and natural gas. Costs are being passed to consumers, which is politically challenging. Rising import bill leads to current account deficit and rupee pressure.

Expect broader inflationary impact and downstream effects on industries. Fertilizer stocks are a concern for the upcoming sowing season.

Asks to quantify the pain if oil prices climb further.

Haslinda Amin

Deepika Saraswat

Any price increase in the crude basket has a significant impact on the import bill. Indian crude basket was at $114/barrel in mid-May. If it rises further, the impact will be very significant. India will have to brace for a bigger impact over a much longer period.

The finance minister has pointed to stress on forex reserves.

Asks how the Iran war has structurally changed India's energy security calculus.

Haslinda Amin

Deepika Saraswat

Energy security is national security for India. High dependency and vulnerability to Strait of Hormuz choke points have driven intensive high-level diplomacy: NSA went to Saudi Arabia, petroleum minister to Qatar, PM signed energy partnership with UAE. India is expanding strategic reserves with ADNOC from 5 to 30 million barrels.

This proves the need for much more intensive diversification.

Asks if India could play a role in mediating the Iran war, given Pakistan's role.

Haslinda Amin

Deepika Saraswat

India has serious stakes in regional stability, with wide-ranging relations with GCC, Iran, Israel, and 10 million Indians residing there. Pakistan's role creates challenges for Indian diplomacy due to its destabilizing policies toward neighbors.

India will likely have to take a more diplomatically active role in stabilizing the region going forward.

Asks if India could cooperate with Pakistan to end the war.

Haslinda Amin

Deepika Saraswat

Do not see that happening. Pakistan's cross-border terrorism and destabilization of neighbors make such cooperation unlikely. If Pakistan can help resolve the crisis, that's good, but cooperation at this point is not a possible proposition.

SignalTube