How Will Iran War Impact India? Montek Singh Ahluwalia Explains At ABP Conclave

At ABP Network India@2047 Summit, Montek Singh Ahluwalia says the Iran conflict could keep oil prices elevated for months, posing risks to India's economy and rupee.

Montek Singh Ahluwalia At ABP Network India@2047 Summit: Oil prices are expected to stay at elevated levels through the end of the year, even if tensions ease immediately.

Source : ABP

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Key points generated by AI, verified by newsroom

• Oil prices may remain high for months, even if tensions ease.
• Global energy markets need time for stability post-resolution.
• High US interest rates and global uncertainty add risks.
• India faces economic challenges from oil prices and currency.

ABP Network India@2047 Summit: Amid growing concerns over the economic fallout of the ongoing Iran conflict, economist Montek Singh Ahluwalia cautioned that elevated oil prices could persist for several months even if tensions ease immediately. Speaking at the ABP Network India@2047 Summit, Ahluwalia outlined the potential implications of the crisis for India, stressing that uncertainty remains the biggest challenge for policymakers and businesses alike.

Oil Prices Likely To Stay Elevated

Ahluwalia noted that any resolution between the United States and Iran would take time to translate into stability in global energy markets. "If US and Iran agree today, it will still take 6 months. Through end of year, oil prices will remain in elevated levels. If crisis deepens, we cant control it. It is an uncertain outcome." His remarks come at a time when global markets are closely watching developments in West Asia, with investors concerned about disruptions to oil supplies and shipping routes. As one of the world's largest crude oil importers, India remains particularly sensitive to fluctuations in energy prices.

Global Uncertainty Adds To Economic Risks

According to Ahluwalia, the impact of the conflict extends beyond oil markets. He pointed to broader global economic conditions that are already weighing on growth prospects. "Interest rates in the US are high, uncertainty is high." Higher interest rates in the United States tend to strengthen the dollar and can trigger capital outflows from emerging economies, creating additional pressure on currencies and financial markets. 

"We can avoid the damage to rupee if CAD comes down," he added.

Banning Imports Would Be Harmful: Ahluwalia

Questioning the sustainability of defending the currency through foreign exchange reserves, Ahluwalia said, "How would you prevent the rupee from depreciating? You'll throw out your reserves, but I am not in favour of using massive reserves."

He argued that macroeconomic adjustments would be necessary to manage the impact of higher import costs, particularly for crude oil. "Macroeconomics will require you to reduce aggregate demand. You won't achieve this by banning or stopping imports, that would be harmful," he said.

Stressing the importance of maintaining currency stability, Ahluwalia said controlling the rupee remains a key challenge for policymakers. He also suggested that consumers and businesses should bear the true cost of imports rather than relying on broad government support.

"Controlling the Indian rupee is crucial today. If you are importing, then you should pay the price unless you are underprivileged," he said, advocating targeted assistance for vulnerable sections instead of blanket subsidies.