Key Takeaways
- The Middle East conflict has caused only limited disruption to India’s overall trade so far.
- Exports of diamonds and imports of fertilisers may see minor, manageable effects.
- Rising crude oil prices could trigger broader inflation and affect sectors like aviation and chemicals.
New Delhi: The ongoing Israel-Hamas war has caused only limited disruption in India’s trade so far but widening of the conflict in the Middle East region could stoke inflation primarily due to higher crude prices, research and rating firm Crisil said on Tuesday.
“Some sectors such as fertilisers and diamonds — both cut and polished — may see a slight, but manageable, impact.
For most other sectors, the impact will be insignificant, according to Crisil.
The rating agency noted that any spillover of the conflict to nearby oil producing and exporting regions could result in supply-related constraints and spiralling prices of crude oil.
Trade data for FY23 shows India’s trade with Israel is relatively low and accounts for only 1.9% of total exports and 0.3% of total imports.
The merchandise exports mainly comprise polished diamonds and petroleum products, including refined hydrocarbons, while imports largely comprise industrial equipment, fertilizers, rough diamonds and precious stones.
Within a week of the conflict, crude oil prices rose 4% to $90 per barrel but have stabilised a tad lower thereafter.
“A sharp rise in crude oil prices will impact linked sectors in India, such as aviation, automotives, paints, tyres, cement, chemicals, synthetic textiles and flexible packaging. Besides, higher inflation may lead to interest rates continuing to rule firm in India till the conflict de-escalates,” Crisil said.
