OIL, TRADE, TARIFFS, OR TRUST: WHAT BREAKS FIRST?

As the ceasefire between India and Pakistan eases immediate tensions, ironically brokered by Trump himself, the bigger question remains: What next for India's economic momentum?

- RAJESH MEHTA & JAYANT SINGHAL

Geopolitics may have quieted for now, but four interconnected economic headwinds continue to gather force—rising oil dependence, hostile tariff regimes, shaky trade rebalancing, and an increasingly hesitant private investor class. This is India's four-way test.

Oil Dependence: A Chokepoint Economy India's energy dependence is deepening. Crude imports rose 4.2% in FY25 to 242.4 MT, driving the oil bill to $137 billion. With 89% of domestic demand met through imports, India remains acutely exposed to external shocks.

The threat today isn't just price—it's logistics. The Red Sea crisis forced tankers onto longer, costlier routes, inflating freight and insurance costs. With over half of India's crude routed through volatile Gulf waters, any escalation could destabilize the current account and stoke inflation. Estimates suggest a $10-per-barrel increase could widen the CAD by $12-15 billion and nudge inflation up by 30 basis points. Russian crude offers short-term relief—but overdependence is a vulnerability, not a strategy.

Trump Tariffs: Friction in the Fast Lane Trump may have brokered peace, but weeks earlier, he reignited a trade war. In April 2025, the U.S. imposed a 10% universal tariff and a steep 27% levy on Indian exports. Electronics ($14B) and gems/jewellery ($9B) were hit hard; pharma was spared, but auto parts, textiles, and footwear felt the squeeze.