|

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.)

Author

FXStreet Insights Team

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

More from FXStreet Insights Team
Share:

Editor's Picks

GBP/USD edges lower due to safe-haven demand

GBP/USD inches lower after opening at a bullish gap, trading around 1.3200 during the Asian hours on Monday. The pair loses ground as the Pound Sterling declines against the US Dollar amid emerging safe-haven demand, which could be attributed to the United States-Iran talks uncertainty.

EUR/USD remains stronger despite uncertainty surrounding US-Iran talks

EUR/USD pair maintains its upward momentum for a third consecutive session, trading near 1.1390 during Monday's Asian hours. Despite this positive streak, the Euro’s gains could face headwinds if geopolitical uncertainty sparks a flight to safety, boosting the US Dollar.

Gold looks south amid US-Iran uncertainty and Death Cross in play

Gold snaps a two-day rebound from seven-month lows, as sellers return in the Nonfarm Payrolls week ahead. The US Dollar holds the previous bounce amid renewed Mideast tensions, hawkish Fed bets. Gold stays a ‘sell on rise’ trade amid bearish RSI and Death Cross on the daily chart.

Bitcoin stuck near $60,000 – Zcash, Jupiter extend losses

The broader cryptocurrency market continues to trade under pressure, with Bitcoin struggling for direction near $60,000 on Monday. Retail sentiment in crypto leans bearish, with CoinMarketCap’s Fear and Greed Index at 15 on Monday, maintaining a sideways trend deep in the “Extreme Fear” zone.

Middle East War updates: US, Iran appear to be returning to talks to end the war

Here’s a brief recap of the key developments in the Middle East war that occurred over the weekend, which are expected to have a significant impact on markets in the upcoming week.

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.