New Delhi, March 5: A recent report indicates that tensions in the Middle East pose minimal risks to the Indian rupee and the country’s growth rate. The findings were released on Thursday by Shriram Wealth, an asset management company.
The report highlights that escalating tensions in the Middle East could lead to a surge in defense stocks and precious metals.
It further notes that a 10% increase in crude oil prices, as projected by the Reserve Bank of India (RBI), may result in a 30 basis point rise in inflation. However, the impact on the rupee’s depreciation and overall growth is expected to be limited.
According to the report, a 5% decline in the rupee could lead to a 35 basis point increase in inflation, but this could also boost GDP growth by 25 basis points.
The firm suggests that the RBI’s foreign exchange interventions are likely to keep the rupee’s depreciation in check.
The report states, “Additionally, a reduction in current tensions should help stabilize the local currency. Based on these estimates, we have observed limited effects of oil prices on domestic inflation and growth outlook.”
For the second half of the fiscal year 2026, the RBI’s baseline estimate for crude oil is set at $70 per barrel, with the rupee projected at 88 against the dollar. The average price of Indian crude oil during this period is expected to be $65 per barrel, with the rupee valued at 89.5 against the dollar.
The report also emphasizes that India’s overall macroeconomic factors, such as a foreign exchange reserve exceeding $700 billion, manageable trade and current account deficits, low inflation and interest rates, and controlled fiscal deficits, are in a robust position, strengthening the broader economy.
Sectors reliant on crude oil, such as chemicals, paints, pharmaceuticals, airlines, tires, and oil marketing companies, may face margin pressures. Meanwhile, companies with significant operations in the Middle East could encounter operational and income-related risks.
It adds, “Amid rising global defense spending, an improved market environment is likely to benefit the defense sector. Any escalation in conflicts may support gold and silver prices in the short term, which would be positive for investments in gold and silver ETFs.”
Approximately 9 million Indians reside in the Middle East, contributing 38% to remittances. This region accounts for 15% of India’s exports and 21% of its imports.
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My name is Ganpat Singh Choughan. I am an experienced content writer with 7 years of expertise in the field. Currently, I contribute to Daily Kiran, creating engaging and informative content across a variety of categories including technology, health, travel, education, and automobiles. My goal is to deliver accurate, insightful, and captivating information through my words to help readers stay informed and empowered.
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