‘India to hurt if Iran war stretches in May’

For India, the fallout from the West Asia conflict, while negative for the macro-economy, would remain manageable if a final peace deal is reached by mid-May.

- Ram Sahgal

Any extension beyond that could push up oil price expectations and have a more severe impact, not just on the macro, but also on earnings for the current fiscal, which are otherwise expected to hold up better than the economy in the context of the war, according to Sanjeev Prasad, managing director and co-head, Kotak Institutional Equities.

Edited excerpts:

The hope was that the West Asia war would end by early April, then mid-April and then we were hoping for mid-May. It keeps on dragging. It has negative implications for India's macro and also micro to some extent. In early March, we were working with a crude oil price assumption of $85 per barrel for full year. Now, two months are over, and there are no signs of any peace framework.

(O)il supply is lower than expectations, which could be in the range of around 10 million barrels per day, or nearly 10% of 104 million barrels per day consumed.

So far, the world has managed by reducing inventory. What happens once inventories plummet?

(With) maybe $85 per barrel crude price on average for FY27, which implies a current account deficit (CAD) of 2% of GDP, that is, twice as much of the prewar level.