India's Oil Buffer Strains as Rupee Slides | World Business Watch | WION

Added: 2026-05-28

[00:00:00]And now shifting focus to India. India's fuel subsidies had cushioned inflation to a certain extent and diversified energy sourcing. It also e supply pressures but with prices rising at the pump now and worldity in global crude at elevated levels that is the rupee strain remains. The currency's recent slide to repeated record lows reflects deeper structural weaknesses, especially due to chrono chron chronically soft capital inflows. Unless those inflows recover, the rupee's vulnerability is likely to persist even as the currency has gained in recent sessions.

[00:00:39]India's response to the latest oil shock raises three core questions. How well policy makers can shield growth and inflation? What's driving the rupee's sharp adjustment and how long the strategy can hold if oil stays high? The rupee has borne the brunt not due to an outsized deterioration in the current account but because of the weaker capital inflows. India managed to shield consumers from the full impact of higher global prices by limiting the pass through to retail fuel prices until miday.

[00:01:12]But since then petrol and diesel prices have been raised four times. Still petrol prices have risen by only about 8% making India one of the least affected economies in the region. As a result the immediate impacting impact on consumer price inflation has been relatively modest estimated at around 20 basis points. Yet underlying cost pressures are building rapidly. The key risk ahead is that if elevated oil prices persist, upstream cost pressures will increase increasingly be passed through to the consumers.

[00:01:50]The rupee is facing a sizable balance of payments deficit. Despite relatively strong macroeconomic fundamentals, structural import dependence continues to bias the currency lower. But analysts say the rupees worse is probably over with 97 per dollar breach. the only likely bet in the near term and 100 rupees per dollar bets now only in a worst case scenario. Overall, while near-term pressures persist, the adjustment is already well underway.