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War and oil: India faces trying times as global risks pile up

India, like most net importers, has a history with oil. The rise in crude oil prices poses inflationary, fiscal and external sector risks for India.

February 24, 2022 / 04:31 PM IST
A man sits outside his destroyed building after bombings on the eastern Ukraine town of Chuguiv on February 24. (Image: AFP)

A man sits outside his destroyed building after bombings on the eastern Ukraine town of Chuguiv on February 24. (Image: AFP)

At a time when Ukrainians are fleeing their homes in the face of a Russian assault, it might be a tad unsavoury to discuss the consequences for India from what are blithely called 'geopolitical tensions'. But, as the last two years have shown, the economic fallout of a humanitarian crisis can be severely debilitating.

Earlier today (February 24), Brent crude futures went past the $100/barrel mark for the first time in over seven years as Russia attacked several parts of Ukraine after President Vladimir Putin approved a military operation to "demilitarise" its neighbor.

India, like most net importers, has a history with oil. After months of record-high local pump prices, an excise duty cut in November 2021 provided some relief to consumers. However, that tax break feels like a lifetime ago.

"Russia accounts for one in every 10 barrels of oil consumed globally, so it is a major player when it comes to the price of oil and it's really going to hurt consumers at the petrol pumps," Navneet Damani, Senior Vice President, Commodity and Currency Research, Motilal Oswal Financial Services, said in a note on February 23.