RBI governor Shaktikanta Das said that drone attacks on Aramco may have some impact on India’s current account deficit and fiscal situation if the issue lasts longer.
RBI governor Shaktikanta Das said that drone attacks on Aramco may have some impact on India’s current account deficit and fiscal situation if the issue lasts longer. In an interview to CNBC TV18, he added that currencies and oil prices globally will be impacted by the Aramco incident. Das further said that he is likely to get clarity on the Aramco incident over the next few days and he will need time to access its long-term impact. Meanwhile, the Indian rupee weakened by over 0.5 per cent, taking cues from the surge in global oil prices by $10 per barrel.
Increase in oil prices is always going to be a cause of concern for India considering the country imports more than 80% of our oil requirements. “We assume at the macro level with imports of 1643 million barrels of crude oil in FY20 a dollar increase in prices on a permanent basis would increase the bill by roughly USD 1.6 billion per annum,” said a report by Care Ratings.
The trade deficit of India is also likely to widen as oil constitutes the major portion of India’s overall imports. Disrupting the supply of around 5.7 million barrels per day, Saturday’s drone strike on Saudi Arabia’s oil refinery has disrupted the supply of around 5 per cent of total global supply. However, Saudi Arabia said that it will restore the production soon and till then the US is asked to increase additional supply from its reserves.
However, if the production is stalled for a longer time, retail prices of petrol and diesel in India is also likely to surge. Fuel prices in India may rise by Rs 5-6 per litre due to the increase in the oil prices globally, Kotak Institutional Equities said in a research note. However, the Ministry of Petroleum and Natural Gas said in a statement that they have been assured of the regular supply and they are closely watching the situation in consultation with Indian oil refiners and Saudi Aramco.