West Asia tensions spell uncertainty for economy
Sitharaman had also estimated 5% higher excise duty collection from the petroleum sector in FY25 at ₹3.18 trillion. During the fiscal year, Centre’s excise duty receipts had declined by 4.8% annually to ₹3.04 trillion. The budget had also projected a 10.5% nominal GDP growth in FY25 to ₹327.7 trillion.
Experts said rising geopolitical tensions can have a bearing on investments and growth prospects. “Any disruption in the supply chain posing inflationary pressures could have some impact on India’s economic growth rate, as it will influence the policy rate setting decisions of the RBI. There could be some constraint to growth in that regard depending on how the situation pans out,” said Suranjali Tandon, associate professor at National Institute of Public Finance and Policy (NIPFP). Also, supply chain shocks could spark a trade policy response from
India to make ensure there is adequate supply in the domestic market, said Tandon.
India has taken the approach in the recent past of banning and putting restrictions on select farm produce to ensure domestic availability. India had also lowered import duty on edible oils in the recent past to cool domestic prices. However, a surge in global oil prices could potentially add to excise duty collection and windfall profit tax, said Tandon.
An expanding conflict in West Asia is a cause of concern for crude oil and natural prices, said Prashant Vasisht, senior vice president and co-group head, corporate ratings at ICRA. “About 20 million barrels per day of crude oil and condensate equivalent to about a fifth of the global consumption pass through the Strait of Hormuz of which about 70% comes to Asia.” The Strait of Hormuz is a narrow waterway between the Persian Gulf and the Gulf of Oman, linking West Asia and the Indian Ocean and is a key maritime route for trade that is vital for India’s energy security.
“Besides crude oil, Qatar ships its LNG through the Strait of Hormuz accounting for a fifth of the global consumption. Accordingly, Strait of Hormuz is the world’s busiest energy channel and any closure of the same may lead to surge in the prices of both oil and natural gas/LNG,” he said.
Subhash Narayan contributed to the story