Amid apprehensions about the likely fallout of the Iraq crisis on Indian economy, the head of the country’s central bank has assured that India is ready to deal with any situation or complexity that may arise in response to the ongoing crisis in the energy-rich Gulf country.
Reacting to the Iraq crisis, Reserve Bank of India (RBI) governor Raghuram Rajan has said that the country has enough foreign exchange reserves and is better prepared to deal with unforeseen situations that may pose a threat to the Indian economy. “As far as the external front goes, we are in much better position than we were last year. We have sufficient reserves. The CAD (current account deficit) is low. And I think one should not worry too much on external environment front,” Rajan said June 17. Allaying fears over rise in oil prices that in turn may lead to a spike in inflation, he stressed that the central bank was closely watching the situation in Iraq.
Rajan, a much-regarded economist of international repute, pointed out that oil resources are mostly located in the south of Iraq and underlined that the crisis has not directly affected the oil business.
The price of the India crude basket rose to $110.31 on June 17, up from $106.88 per barrel at the beginning of the month. India imports around 2 million barrels of crude oil per day. If the Iraqi crisis exacerbates, it could lead to an increase in India’s import bill. Experts point out that the crisis in Iraq will not, however lead to a shortage of petroleum products because India processes its oil imports to produce diesel, petrol, LPG and kerosene in large quantities.
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