Current account deficit and falling rupee are biggest concerns of the Gulf crisis

First Came the War, Then the Blockade, Now the Shortages; Epic Fury Has Become Epic Folly

In a recent op-ed in the Financial Times, headlined ‘The Gulf crisis may just be starting’, the paper’s well-known and highly regarded Chief Economics Commentator, Martin Wolf, analyses the impact of an aspect of the Gulf crisis that so far hasn’t got the attention it deserves i.e. the shortages and how their impact could get worse the longer they remain and the greater the physical damage done in the Gulf. He believes the real Gulf crisis may only just be starting. And he ends his Financial Times article with the following sentence: ‘The US called its war Operation Epic Fury. But Operation Epic Folly would have been a more realistic name’.

Current account deficit and falling rupee are biggest concerns of the Gulf crisis

The Chief Economist of Axis Bank and a Member of the Prime Minister’s Economic Advisory Council says in his opinion the current account deficit and the falling rupee are the “most binding constraints” emerging out of the current Gulf crisis. Neelkanth Mishra also believes that the impact of the Gulf war and the oil crisis could be around 0.7%-08% of GDP growth. He says: “The sensitivity is that about $15 per barrel increase in oil price costs the economy about $40 billion or 1% of GDP. So if you take the average price of $70 a barrel of last year, if the oil price averages $85 a barrel, there’s a 1% of GDP impact. If it’s a $100 a barrel, it’s a 2% of GDP impact.”

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'I’m deeply concerned by the election results; the Republic has no reason to celebrate'

In an interview to discuss the election results that were announced yesterday (the 4th of May) as well as what they mean for India as a whole and what they suggest about the BJP’s hold over the country, Yogendra Yadav, the National Convenor of the Bharat Jodo Abhiyan, has said he is deeply concerned, adding he doesn’t believe the Indian Republic has reasons to celebrate the outcome. “As a democrat, as someone who thinks about the future of the Indian Republic, I am deeply concerned. I don’t resent the winners. They have every reason to celebrate. But does the country, does the Republic, have reasons to celebrate? I am not sure.” Yogendra Yadav argues that the window that seemed to open with the Parliamentary election results of 2024, but was steadily narrowing thereafter, is now firmly shut. “The window of opportunity that opened in 2024 with the Parliamentary elections, suddenly a whiff of fresh air, suddenly the country looked more democratic than it appeared for a few years, and suddenly it seemed as if things could happen, could change, that window became narrower after Maharashtra and Haryana elections and particularly after the Bihar elections. I think it’s safe to say that the window is firmly shut today.”

Rising Oil Prices Could Reduce India’s GDP Upto 2.5% – A Fairly Substantial Fall

In an interview to discuss the impact of rising oil prices – which yesterday touched $126 per barrel – on both the world economy and India’s economy, economist and former Chief Statistician of India Pronab Sen said that rising oil prices could reduce India’s expected GDP growth by up to 2.5%. He agreed that this was a fairly substantial fall. Sen said he was particularly worried about India’s exports to the Gulf region which have presently been blocked by the closure of the Strait of Hormuz. He said he was not confident that India could find alternate markets for what it sells to the Gulf countries and if it can’t this will have a direct impact on the concerned exporters leading, he agreed, to losses in jobs. This, he believes, will be a major component of the decline in GDP growth that he talked about.