Iran-Israel War : Impacts on India’s Trade

Why in News ? The recent West Asia tension can cause oil supply disruption from the region to India . The regional and global oil flows and international oil prices could see high volatility in near future.
• India is the world’s third-largest consumer of crude oil and depends on imports to meet over 85 per cent of its requirement.
Impacts on India:
• Given the country’s extremely high import dependency, India’s economy is highly sensitive to oil price volatility.
• Inflationary pressures
• High oil prices have implications for India’s trade balance, foreign exchange reserves, the value of the rupee, and the overall health of the economy.

Key facts:
• India currently does not import Iranian oil as Tehran is under sanctions from the United States (US).
• However, another major buyer — China — does import large volumes of Iranian oil.
• If the conflict leads to Iranian supply getting hit, India’s competition with China for oil barrels from other suppliers particularly Russia is bound to intensify.
• India and China are currently the biggest buyers of the discounted Russian crude.
• India does buy large volumes of crude oil from other West Asian suppliers like Iraq, Saudi Arabia, and the United Arab Emirates (UAE).