War-struck rupee: Time for crisis management?

India needs a judicious mix of administrative and central bank action to deal with the Iran war’ fallout on its currency. We must explore all options—tighter forex controls included

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t depends is almost always the right answer to any big question,” said Linus Torvalds, the software genius behind the Linux operating system’s kernel. As the Indian rupee continues to weaken, one of today’s big questions is this: What policy options does India have? The right answer is that it depends—on how long the war continues. More specifically, on how long the Strait of Hormuz remains shut to oil tankers. The price of Brent crude oil hit a high of nearly $120 per barrel on 9 March, surging by about 66% since the Iran war started on 28 February. Brent has dipped, but threatens to go into three digits again. We import almost 90% of our crude-oil needs and a larger proportion of our natural gas, with a sizeable portion of these shipments now trapped in the Gulf by the war. This dims the prognosis for our trade deficit, inflation, fiscal position and rupee’s value against the dollar.