India: Energy shock risks and policy playbook – Societe Generale

Societe Generale’s Kunal Kundu analyses how the Iran conflict exposes India’s macro vulnerabilities through imported energy dependence and trade route risks. Kundu highlights broad spillovers from higher Oil and gas prices into the consumption basket and external balances. He argues for a calibrated fiscal–monetary mix, with the central bank treating inflation as transitory and targeted government support for households.

Imported energy strains and policy response

"Four weeks into the Iran conflict, uncertainty remains the only constant. India is feeling the fallout, exposing macro vulnerabilities in energy security, trade logistics, price stability, and external balances."

"Despite oil intensity of GDP trending lower and a relatively contained oil trade deficit, heavy reliance on imported energy leaves India exposed if disruptions persist."

"The conflict highlights route risk via the Strait of Hormuz and the Red Sea, compounding import and supplier concentration risks."

"Spillovers are broad as oil and gas feed into most of the consumption basket—electricity, plastics, fertilisers, chemicals, and more."

"Appropriate approach: the central bank treats inflation as transitory, ends the easing cycle while maintaining ample liquidity; the government deploys targeted fiscal measures (aided by RBI [Reserve Bank of India] dividend transfer) to limit pass-through and support vulnerable households."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)