Middle East conflict presents several short-term obstacles for Indian economy: RBI MPC member

An external member of the RBI's rate-setting panel, Nagesh Kumar, has said that the ongoing Middle East conflict presents several short-term obstacles for the Indian economy, but it is unlikely to significantly affect the country’s long-term growth prospects.

He said in the current scenario, a sharp rise in crude oil prices, export disruptions and impact on remittances have been identified as the immediate challenges on the growth front. He noted that in the immediate short run, the conflict is escalating with US-Israel strikes and oil prices are likely to harden.

Despite these risks, Kumar expressed hope that the crisis will be resolved soon, given the high stakes that the world has in the region. He said that diversification of oil sourcing could help mitigate risks. He noted that the opening up of Venezuelan oil supplies for India is also likely to be helpful, as it diversifies the options.

He added that in the event the Middle East crisis ends quickly and sanctions on Iran are lifted, India may gain from cheaper oil supplies. Looking ahead, he emphasised the need for fiscal and monetary policies to work in a coordinated manner to push India’s gross domestic product (GDP) growth on a higher trajectory.