{"id":93355,"date":"2026-03-18T10:41:24","date_gmt":"2026-03-18T05:11:24","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=93355"},"modified":"2026-03-18T11:43:15","modified_gmt":"2026-03-18T06:13:15","slug":"global-energy-shock-in-india","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/global-energy-shock-in-india\/","title":{"rendered":"Global Energy Shock in India: How Global Energy Shock Threatens Goldilocks Growth"},"content":{"rendered":"<h2><b>Global Energy Shock Latest News<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Rising global energy shocks, driven by geopolitical conflicts and disruptions like the closure of the Strait of Hormuz, are putting pressure on India\u2019s rupee, inflation, and overall economic stability.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">As a result, India\u2019s <\/span><b>Goldilocks phase<\/b><span style=\"font-weight: 400;\"> (stable growth + low inflation) is under threat from external energy shocks, underscoring the need for energy diversification and macroeconomic resilience.<\/span><\/li>\n<\/ul>\n<h2><b>India\u2019s Structural Energy Vulnerability<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">India remains heavily dependent on imported energy, making it highly exposed to global price shocks.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Recent crises \u2014 Russia\u2013Ukraine war and West Asia conflict \u2014 highlight that not just financial markets, but the entire economy is vulnerable.<\/span><\/li>\n<\/ul>\n<h3><b>Pressure on the Rupee<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The rupee is weakening due to:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Weak FDI inflows<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Portfolio outflows: $11.8 billion (2025); $4 billion (2026 so far).<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Exchange rate trends:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Fell below \u20b990\u201391 per dollar (Dec)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Breached \u20b992 per dollar recently<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">If crude prices stay high, the rupee may approach \u20b9100 per dollar.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">At $120+\/barrel:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Oil trade deficit could reach $220 billion<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Current Account Deficit (CAD) may exceed 3.1% of GDP<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">High deficits may trigger:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Sharp rupee depreciation (10%+ historically)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Rising inflation<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Liquidity crunch in the economy<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><b>India\u2019s Goldilocks Growth\u2013Inflation Balance Under Threat<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">India has recently enjoyed a \u201cGoldilocks\u201d phase of strong growth and low inflation:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">GDP growth rose from 6.7% (Q1 2025\u201326) to 8.4% (Q2), then 7.8% (Q3)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Inflation dropped to 2.75% (Jan, new CPI series), below RBI\u2019s 4% target<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">However, this favourable macroeconomic balance is now at risk due to rising crude oil prices and fuel supply disruptions, which could disrupt both growth and inflation stability.<\/span><\/li>\n<\/ul>\n<h2><b>Rising Oil Prices Threaten Growth and Inflation Stability<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Crude oil prices, after briefly crossing $100\/barrel, remain volatile and above $90\/barrel despite efforts like potential IEA reserve releases.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Iran has warned of further escalation, even suggesting prices could reach $200\/barrel.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">India received a 30-day waiver to import Russian oil, but its impact is limited.<\/span><\/li>\n<\/ul>\n<h3><b>Domestic Impact: Fuel Shortages and Policy Response<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Gas shortages have forced the government to:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Prioritise key sectors for supply<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Increase LPG prices by \u20b960 per cylinder<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Extend refill waiting period from 21 to 25 days<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Though petrol\/diesel prices remain unchanged, household inflation pressures are rising.<\/span><\/li>\n<\/ul>\n<h3><b>Inflation Risks Intensifying<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Nomura raised <a href=\"https:\/\/vajiramandravi.com\/current-affairs\/new-consumer-price-index\/\" target=\"_blank\"><strong>CPI inflation<\/strong><\/a> forecast (2026\u201327) to 4.5% (+70 bps).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">UBS estimates inflation could cross 5% if crude hits $100\/barrel with full pass-through.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Rising fuel costs are expected to push up overall price levels.<\/span><\/li>\n<\/ul>\n<h3><b>Growth Outlook Weakening<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">RBI projects GDP growth at 6.9\u20137% in early 2026\u201327.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Economists see downside risks emerging:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Nomura cut forecast to 7%<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">UBS &amp; DBS estimate 40 bps reduction if oil stays at $100\/barrel<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><b>Who Bears the Cost of Rising Fuel Prices<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">If retail fuel prices are not increased, the burden shifts to:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Government finances<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Oil Marketing Companies (OMCs)<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Political considerations (elections in early 2026) may delay price hikes, with OMCs initially absorbing the shock.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Government may also cut excise duties instead of raising fuel prices.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">However, both options lead to revenue losses or financial stress.<\/span><\/li>\n<\/ul>\n<h3><b>Fiscal Targets Under Pressure<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Budget targets for 2026\u201327 at risk:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Fiscal deficit: 4.3% of GDP<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Debt-to-GDP ratio: 55.6%<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Revised GDP estimates (3\u20134% lower) already made targets harder to achieve.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Elevated oil prices could increase fiscal deficit by ~30 basis points (bps).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A \u20b92 excise cut may cost \u20b932,000 crore annually.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Additional pressures: Fertiliser subsidy increase (\u20b919,230 crore extra in 2025\u201326).<\/span><\/li>\n<\/ul>\n<h3><b>Government Response Measures<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Creation of an Economic Stabilisation Fund (\u20b91 lakh crore) to manage shocks from global volatility.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The situation remains highly fluid. If the conflict ends and supply stabilises, the economic impact may be limited.<\/span><\/li>\n<\/ul>\n<p><b>Source:<\/b> <strong><a href=\"https:\/\/indianexpress.com\/article\/explained\/explained-economics\/rupee-inflation-growth-how-global-energy-shock-threatens-indias-goldilocks-era-10578185\/\" target=\"_blank\" rel=\"nofollow noopener\">IE<\/a> | <a href=\"http:\/\/ft.com\/content\/f7c743e1-7bfd-42c4-9f9f-d9545f9c6a06\" target=\"_blank\" rel=\"nofollow noopener\">FT<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Global energy shock in India is threatening growth and inflation stability. Rising oil prices and rupee pressure highlight risks to India\u2019s Goldilocks phase.<\/p>\n","protected":false},"author":18,"featured_media":93372,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[6159,60,22,59],"class_list":{"0":"post-93355","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"tag-global-energy-shock","9":"tag-mains-articles","10":"tag-upsc-current-affairs","11":"tag-upsc-mains-current-affairs","12":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/93355","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=93355"}],"version-history":[{"count":5,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/93355\/revisions"}],"predecessor-version":[{"id":93383,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/93355\/revisions\/93383"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/93372"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=93355"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=93355"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=93355"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}