Economist Geeta Gopinath warned that the crisis in West Asia could lead to crude oil reaching $140 by June. This will increase inflation in India and slow down growth. This is affecting global fuel, LPG and fertilizer supplies.
Former Deputy Managing Director of IMF and renowned economist Geeta Gopinath has warned that if tensions in West Asia continue till June, the prices of petrol and diesel in India may skyrocket. He said that this will increase inflation in the country and the pace of economic development may also slow down. Geeta Gopinath made it clear that the crisis in West Asia is not limited to prices only. This has become a major crisis, which is affecting the supply of fuel, LPG, LNG and fertilizers across the world.
He said that the situation is such that the goods are not available as per requirement. India is largely dependent on the Middle East for fuel, so this shortage is having a deep impact on us. Due to the dispute in the Strait of Hormuz, fuel supply has stopped across the world. Because of this many countries have to depend on their reserves.
Will crude oil reach $140?
Geeta Gopinath believes that if the interruption in supply continues till June, the matter may worsen. Currently, the price of crude oil in the international market is $110 per barrel. If the price has to be maintained at this level, the demand in the market will have to be reduced significantly. But Geeta Gopinath estimates that by June the price of crude oil may reach $ 140 per barrel. Many countries are hoping that America will intervene and open the Strait of Hormuz, but even if an agreement is reached today, it will take two to three months for the supply to return to normal.
Petrol and diesel prices will increase further
When asked whether fuel prices in India would increase further, he replied that this is an external crisis which is not under India’s control, so the government does not have much recourse. He said that due to increase in prices, people themselves will reduce the use of fuel. But the entire burden of this crisis should not be borne by the government alone. On one hand, the government will have to bear some financial loss and on the other hand, it will have to pass on some part of the increased prices to the people and companies. He warned that the inflation rate in the country will gradually increase in the coming months.
No need to fear even if rupee crosses Rs 100
Last February, the price of one dollar was Rs 91, which has now reached close to Rs 97. But Geeta Gopinath says that there is no need to worry too much about whether the rupee will touch the level of 100 or not. According to him, the exchange rate data is not as important as the focus has to be on employment, inflation and production in the country.
Falling rupee makes foreign goods expensive, but this will also help India reduce imports. He said that it is not right for RBI to interfere too much in the market. India currently has strong foreign exchange reserves of Rs 70,000 crore, but this too is limited. He made it clear that if too many dollars were spent to manage the market, these reserves could be exhausted.
The poor and small businessmen should get help
Geeta Gopinath supported the government’s stand that people should control themselves during times of crisis. But at the same time he reminded that the entire burden should not be put on the common man. He suggested that the government should implement schemes like sending money directly into the bank accounts of poor and middle class families facing the crisis. He also said that small businessmen troubled by increased fuel expenses should be given financial assistance and government guaranteed loans.
India is strong, no need to panic
Geeta Gopinath rejected claims that India is heading towards a major economic recession. He said that even though the challenges are big, domestic demand in India is still strong. Government spending on infrastructure and large foreign exchange reserves are India’s strengths. However, he acknowledged that India still faces some challenges in attracting foreign investment. He said that it would not be completely wrong to compare this crisis with the crisis of the Corona period. If the price of oil remains at $140, it will be a big crisis not only for India but for the entire world. Nevertheless, he said there is no reason to panic now and as the Prime Minister has said, this is the time to adjust to the changes.
Who is Geeta Gopinath?
Geeta Gopinath is a world famous economist of Kerala origin. She is a professor at Harvard and has also been the former Deputy Managing Director of the IMF. In 2016, when Pinarayi Vijayan became the Chief Minister for the first time, Geeta Gopinath was appointed his economic advisor. His work in this position was to help in implementing the economic development models of the world according to Kerala. She remained in this post for almost two years. In October 2018, when he was made the Chief Economist of the International Monetary Fund (IMF), he officially resigned from the post of advisor to the Chief Minister of Kerala.