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The rise in oil prices is expected to increase the current account deficit (CAD) of major crude-importing Asian economies, which include India, according to an initial expert commentary.
A research by Nomura suggests a 10% rise in oil prices can increase CAD by 0.4 percentage points. The research team said this is because imported crude’s share in India’s gross domestic product (GDP) is about 3.7%. As of third quarter of fiscal 2026, India’s CAD stands at $93.6 billion which is 1.3% of GDP.
In another research note, Barclays said a $10 a barrel rise in oil prices would mean India’s CAD may increase by another $9 billion.
But the inflation pass-through of this would be limited, said experts. “EM (Emerging markets) Asian economies that are most sensitive to the inflationary impact of higher oil prices (India and Thailand) also use price controls and subsidies that limit immediate inflation, with costs absorbed by fiscal authorities or state oil companies. Moreover, the current low inflation starting point provides a cushion,” Nomura said in its note.
Impacts on corporations are expected to be limited due to minimal exposure to West Asian imports. However, a prolonged conflict would lead to logistics getting dearer, said India Ratings. “The impact on account of the closure of the Strait of Hormuz is likely to be temporary. However, in the event of a long-term closure, ships will likely have to take a longer route through the Cape of Good Hope,” India ratings said in its note.
Such an event may elevate freight cost by 3%-5%, assuming around 10% increase in bunker fuel costs is fully passed on. Further, insurance premiums would increase, ranging from 0.1%-0.5%. Overall, logistics costs of imports and exports are likely to increase, though volumes are unlikely to be affected based on past experiences”, India Ratings added.
On the overall growth front, BMI, a Fitch group company, said India’s GDP is expected to grow at 7.9% in fiscal 2025-26, and this is an upward revision by 0.5 percentage points as trade data came in favourably. “There is, however, a possibility of an increase in risk due to the war against Iran,” BMI said. The risks can be compensated for by an increase in GDP if reciprocal tariffs are struck down. “Modelling by BMI suggests a full closure of the Hormuz Straits could directly reduce GDP by up to 0.5 pp through higher energy costs. At the same time, the new India-U.S. trade deal and the U.S. Supreme Court’s striking down of Trump administration reciprocal tariffs could boost India’s economy by more than we expect,” BMI said.
Published – March 03, 2026 09:23 pm IST
