If the US-Iran tension spins out of control, the implications would be unknown globally.
India’s sagging economy may face another hit but this time it is not from the domestic market. Tensions between the US and Iran are surging every day after American President Donald Trump took the responsibility of killing Iranian military’s supreme leader Qassem Soleimani. Even before the effect of the prolonged US-China trade war could fade away, this new war has raised many tensions worldwide, to which India is not immune. “If the US-Iran tension spins out of control, the implications would be unknown globally,” Vikram Limaye, MD and CEO, National Stock Exchange (NSE), told The Indian Express. Stating that India can’t be immune as an economy and market, he said the only hope is that other countries and the UN would weigh in and won’t let a knee-jerk response take place.
India’s share market is highly volatile and if the other major markets catch a cold, Sensex starts to sneeze. Amid the rising crude prices and rising tensions, the benchmark Nifty at NSE and Sensex at BSE fell 1.9 per cent each on Monday. Vikram Limaye said that there is a need for broad basing the Indian market with quality stocks that have liquidity as the concentration of fund flow in few stocks is a risk.
Another major issue for India is oil as it is the largest component of India’s imports and plays an important role in maintaining the country’s overall financial health and macroeconomic stability. The ongoing possibility of US-Iran war has picked up oil prices globally and this can raise India’s current account deficit as well.
However, Vikram Limaye said that he hopes in today’s world, there are enough checks and balances and it is not easy for things to spiral out of control, because extensive discussions take place between various countries and the UN. That makes sure that there is a balanced way of approaching things and it will get managed in that context, he added.