30 Indians died, GDP fell by 1.2% and inflation increased by 2.5%! How much did India lose in the US-Iran war?

When two countries of the world fight among themselves, the country that burns the most in the fire is the one which is neither a friend nor an enemy. He is just doing his work. During the America-Iran war, India was seen standing in exactly the same situation. Neither were we parties to the war, nor did we attack anyone. But this war has caused serious damage to life and property of India. In the explainer, let us understand what India lost in the Middle East War…

India’s loss that will never be healed

During the US-Iran war, Indian sailors working in the Strait of Hormuz and the Persian Gulf had to pay a heavy price. These were the people who worked on oil tankers and shipping ships. They neither had anything to do with the war, nor were they part of any army. But when missiles were fired and ships were targeted in the Hormuz area, these sailors were the most vulnerable.

These were the people who had boarded foreign ships to feed their families. These sailors from Kerala, Tamil Nadu, Gujarat, Maharashtra and Andhra Pradesh were never able to return to their homes. The Indian government raised this issue strongly with both Iran and the United States and made diplomatic efforts to bring back the bodies of the deceased.

Those Indian laborers who remained stranded in Gulf countries

As soon as the war started, the lives of millions of Indian migrant laborers living in Gulf countries like UAE, Qatar, Oman and Saudi Arabia were in danger. These people were not directly in the war zone, but when Hormuz was closed and air travel was banned, they were trapped in their homes. Although there were no confirmed reports of large-scale deaths of people from here, the risk to life remained constant. The Indian government evacuated thousands of Indians under ‘Operation Hormuz Safety’.

India’s economy burns in the fire of oil prices

According to the report of the International Food Policy Research Institute (IFPRI), the economic impact of this war on India was at three levels:

1. Rise in oil prices

After the start of the war, the price of crude oil jumped from $ 82 per barrel to more than $ 100 per barrel. India imports 85% of its crude oil needs, a large part of which comes via the Strait of Hormuz. When the Strait of Hormuz was closed, the oil supply was severely affected. According to IFPRI:

India bore the economic fire of this war to some extent, but it had to pay a price:

• India’s crude oil import bill increased by about 25-30% compared to before the war.
• Retail prices of petrol and diesel increased by Rs 8-12 per liter.
• The price of LPG cylinder increased by Rs 150-200, which directly affected the common kitchen.
• India had to buy oil from alternative oil importers like Russia, Iraq and Saudi Arabia, but due to long route and high freight, there was an additional burden of 5-7 dollars per barrel.
• Shipping freight alone increased by 40–50%, as ships had to take longer routes to avoid Hormuz.
• There was increased pressure on India’s foreign exchange reserves, which decreased by about 15-20 billion dollars during the war.

2. Blockage of business routes

The Institute of South Asian Studies (ISAS) of the National University of Singapore published a paper on the impact of this entire conflict on India. According to:

3. Global inflation pressure

A research paper published in the International Journal of Economics and Financial Management (IJEFM) examined in depth the impact of this war on India. According to:

• Pressure on fiscal deficit: The government had to cut excise duty to provide relief to consumers from rising oil prices. Due to this, there is an estimated reduction of about Rs 1 lakh crore in government revenue.
• Fertilizer Crisis and Food Security: India imports 60% of its DAP fertilizer requirement and entire potash. Due to the war, fertilizer prices increased by 66%, which directly affected the cost of Kharif and Rabi crops.
• Impact on stock market: A huge fall was seen in Sensex and Nifty amid the fear of war and closure of Hormuz. In a single week, the Sensex had fallen by almost 3,000 points, due to which investors’ wealth worth crores of rupees was wiped out.

Did India pass this test?

According to the report of Times of India, India was successful to some extent in dealing with this crisis. The government increased purchases of cheap oil from Russia and Iraq, used strategic oil reserves and, when necessary, resorted to the dollar-rupee swap mechanism. The report also warns that if the war continues for a long time, combined with El Nino, it could prove to be a double whammy for India.

This war may have been fought thousands of miles away, but its heat reached every home in India. The 30 sailors who could not return to their families are its biggest cost. The economic shocks that hit the pockets of the common man are a reminder that the flames of fire in any corner of the world do not leave anyone untouched in today’s connected era.