The ongoing conflict in West Asia has exposed India’s structural vulnerability to global energy shocks and underscored the urgent need to reduce dependence on imported crude oil, according to an external member of the Reserve Bank of India’s rate-setting panel.
Nagesh Kumar, who is also director of the Institute for Studies in Industrial Development, said India must simultaneously boost domestic oil and gas exploration and accelerate its transition towards cleaner and alternative energy sources to strengthen long-term energy security.
He noted that India’s heavy reliance on imported hydrocarbons leaves the economy highly exposed to volatility in global oil markets. While macroeconomic fundamentals remain strong and India is expected to stay the fastest-growing major economy with growth projected near 7 per cent in 2026–27, he stressed that energy resilience must become a policy priority to sustain this momentum.
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Kumar said the West Asia crisis is affecting India through multiple channels, including higher import costs, pressure on the rupee, and rising input prices for industries. Disruptions in key shipping routes have further pushed crude oil prices higher, complicating the inflation and growth outlook.
He added that India imports a significant share of its crude oil and natural gas requirements, making it highly sensitive to geopolitical instability in West Asia. The current situation, he said, should serve as a wake-up call for long-term structural reforms.
Among the key policy priorities, Kumar highlighted increased domestic exploration—both offshore and onshore—expansion of strategic petroleum reserves, and a faster shift toward electrification in industrial and household energy use. He also stressed accelerating renewable energy adoption as part of the broader clean energy transition.
According to him, the recent surge in oil prices could widen the current account deficit and add inflationary pressure, even as domestic demand remains relatively strong. Sectors such as MSMEs, particularly those dependent on natural gas, are already feeling the impact, while overall economic sentiment has weakened amid global uncertainty.
The government, he noted, has responded with diplomatic efforts to secure stable supplies and fiscal measures such as excise duty cuts to cushion retail fuel prices. However, he emphasised that long-term resilience will depend on reducing structural dependence on imported energy.
Kumar also underlined the importance of improving energy efficiency, diversifying import sources, and leveraging trade agreements to boost exports, which could help offset external imbalances caused by higher energy costs.
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