According to a report by SBI Research, if the growing conflict in the Middle East spreads to supply chains, asset classes and different sectors, it could trigger a new wave of global inflation. However, compared to many other economies, India can remain largely protected from this impact. The report warns that increasing geopolitical tensions could have far-reaching effects on energy markets, trade and financial systems around the world. Let us also tell you what has been said in the SBI Research report?
Global inflation may increase
The report said that if the fierce conflict going on in the Middle East spreads unevenly across different sectors, asset classes and supply chains, then its combined shock could create a new wave of inflation around the world. However, India may remain a notable exception in this matter. The report further said that although its immediate economic impact may be limited, disruptions to trade routes, supply chains and the business environment could have wide-ranging consequences for the global economy. The report said that the immediate impact of the increasing conflict in the Middle East on inflation is likely to be limited. But potential disruptions in trade and supply chains, a weakening business environment and increasing uncertainty could have serious consequences for the global economy.
What effect on India?
If we talk about India, then it has been said in the report that the main impact of this conflict may be on the remittances coming from Gulf countries (money sent from abroad) and the import of crude oil. The report says that its impact on India’s economy may be short-term in the form of remittances and crude oil imports. A large part of the total remittances India receives from abroad comes from the Gulf region, due to which fluctuations in oil prices become an important factor for India.
India’s remittances and crude oil
The report states that India’s personal remittances will increase by 15% to reach $138 billion in the financial year 2025… GCC countries contribute about 38% to the total remittances received by India. Energy security is also another important aspect, because India depends largely on imported crude oil for its energy needs. The report says that India imports about 90 percent of its crude oil needs. The report also states that a large part of the global oil trade passes through the ‘Strait of Hormuz’, which is a major route for energy transportation. Along with this, the report also highlights that in recent years, India has taken several steps to diversify the sources of crude oil purchase.
Oil is being purchased from 40 countries
The report said that India has started importing oil from more than 40 countries while strategically expanding its sources of oil purchases, and oil imports from Russia have increased especially since the year 2022. This step helps in reducing the risks associated with oil supply. The report also warns that if the conflict continues for a long time, rising oil prices could have widespread economic consequences.
SBI’s suggestion
It is estimated that every increase of about $10 per barrel in crude oil prices could increase CAD (current account deficit) by 36 basis points and inflation could increase by 35-40 basis points. Overall, the report suggests that if geopolitical tensions escalate further, global markets may once again face inflationary pressures; But due to the diversity of India’s energy sources and policy measures, the impact may be less on India than on many other economies.