Brent Crude Surges To USD 108.77, Raises Growth And Inflation Risks For India

New Delhi, Sep 12 (KNN) Brent crude oil prices surged to a four-month high of USD 108.77 per barrel on Friday as tensions in West Asia escalated, raising concerns over the impact of higher energy costs on India’s economic growth, inflation and external sector.

Brent was trading at around USD 107.75 per barrel at the time of reporting, after gaining more than 12 per cent over the past week amid concerns over global energy supplies and disruptions to key energy corridors.

Economist Sunil Sinha, former Senior Economist at the National Council of Applied Economic Research (NCAER), said a sustained rise in crude prices could weigh on India’s growth by increasing inflation and import costs while widening risks to the current account.

Sinha estimated that every USD 10 increase in international crude oil prices could lower India’s GDP growth by around 20-30 basis points.

With India’s latest quarterly GDP growth at 7.8 per cent, he said a further increase in oil prices could put pressure on the growth outlook in the coming quarter, reported ANI.

Oil Shock Raises Import And Inflation Risks
Higher crude prices are particularly significant for India as an oil-importing economy. An increase in global prices raises the country’s import bill and can put pressure on the current account.

Higher fuel, transportation and input costs can also feed into inflation and increase operating costs for businesses, while putting additional pressure on household spending.

The latest surge marks a reversal from the decline seen earlier this year. Crude prices had fallen below USD 80 per barrel after touching similar levels in May, as expectations of easing geopolitical tensions supported the market.

West Asia Escalation Adds To Supply Concerns
The renewed escalation in West Asia has disrupted energy corridors and triggered wider regional military mobilisation, increasing uncertainty around global crude supplies.

Brent’s move above USD 100 per barrel has therefore brought renewed focus on the sensitivity of major oil-importing economies such as India to geopolitical shocks.

The duration of the conflict and whether crude prices remain above USD 100 per barrel will be key factors determining the impact on India’s growth, inflation and external-sector outlook in the coming months.

(KNN Bureau)