Desi talk

www.desitalkchicago.com – that’s all you need to know 19 INDIA˨US˨MIDDLE EAST March 13, 2026 Analysis-Iran War To Weigh More On Indian Growth Than Inflation, Keeping Interest Rates Low T he U.S. and Israel’s attack on Iran is expected to weigh more on India’s economic growth than its inflation, which will encourage the Reserve Bank of India to keep interest rates low, three sources familiar with policymakers’ thinking and analysts said. The conflict, which has rippled out across much of the Middle East, has pushed up oil prices by about 15%, disrupted gas flows from the region and triggered selloffs in Indian equity, debt and currency markets, with the rupee hitting a record low and bond yields rising due to concerns about India’s current account deficit and the risk of higher inflation. Despite a weaker rupee and higher crude prices, the central bank is unlikely to take a hawkish turn, all three sources familiar with policy deliberations said. Current assessments could change, one of the sources cautioned, in case of extreme developments in the Middle East. The thinking of policymakers appears to have di- verged from the market reaction. Interest rates have risen in emerging and global mar- kets since the Gulf conflict broke out. Traders in India’s swap markets have added to bets on at least one rate increase over the next 12 months. “I don’t feel the market has sufficiently priced the risk from oil prices rising significantly and there could be room for swap rates to move even higher if Brent oil holds above $80 per barrel over the next couple of weeks,” said Ritesh Bhusari, joint general manager for treasury at South Indian Bank. The RBI’s rate-setting panel, which meets for its next policy review in about a month, paused rate cuts at its last meeting in February after reducing the policy repo rate by 125 basis points in 2025. The sources declined to be identified as they are not authorised to speak to the media. An email sent to the RBI onWednesday seeking comment was not answered. Conflict in the Middle East has muddied the picture for central bank policy projections globally. Traders have pushed back wagers on rate cuts by the Federal Reserve while adding to bets on a hike by the European Central Bank. A rise in oil prices above $100 per barrel or a faster- than-expected pass-through of costs could run the risk of turning global monetary policy more hawkish, accord- ing to analysts at Goldman Sachs. QUICKER HIT TO GROWTH An immediate risk to India’s growth comes from dis- ruptions to gas supplies. On Tuesday, Indian companies reduced natural gas supplies to industries in anticipation of tighter flows from the Middle East, a move that could hurt output in sectors including fertilisers and power. If gas supply disruptions persist for more than four weeks, they could hurt economic growth for at least a quarter, one of the sources said. If oil prices remained above $90 to $95 a barrel for three to four quarters in a row, the source said, India’s expected 7%-plus economic growth in the next financial year would take a more sustained hit. Under that scenario, growth could slow to about 6.5% from the current expectation for more than 7%, the person added. Cuts in gas supplies to fertiliser and power companies could reduce output in those sectors in the near term, weighing on growth with a lag in the first and second quarters of the next fiscal year, a second source said. “If oil prices remain high for an extended period, the ‘Goldilocks phase’ for the Indian economy will end,” the person added. INFLATION BUFFERS Inflation, meanwhile, is likely to rise more modestly in the near term. Retail fuel prices in India have not moved in tandem with global crude prices, as fuel retailers often hold prices steady. The government can also cut excise duties to shield consumers if global prices remain elevated, the first source said. “There is plenty of room on the inflation front,” the third source said. “If inflation were closer to 5%, there might have been a case for a pre-emptive hike, but it is currently near the lower end of the RBI’s tolerance band.” India’s retail inflation was at 2.75% in January, closer to the lower end of the RBI’s 2% to 6% tolerance range. A 10% to 20% rise in global oil prices could lift Indian inflation by 25 to 50 basis points if fully passed through to consumers, according to a Deutsche Bank estimate. With a partial pass-through, consumer price inflation could rise to the 4.5% to 5% range, it said. -Reuters By Jaspreet Kalra and Ira Dugal PHOTO: MAJID ASGARIPOUR/WANA (WEST ASIA NEWS AGENCY) VIA REUTERS Smoke rises following an explosion, amid the U.S.-Israeli conflict with Iran, in Tehran, Iran, March 5, 2026. The fast-moving and rapidly changing situation in the Middle East has raised concerns not only about its impact on India’s economy but also for its more than 9 million citizens living in that region. New Delhi, and governments around the world, are grappling with the logistics of repatriating those who want to return home. Below are some aspects of the situation unfolding. As this goes to press, we carry only snippets from the impact on the Indian diaspora. T rump administration officials on Sunday (March 8) defended a decision to temporarily lift some sanctions on Russian oil and predicted that a sharp increase in gasoline prices resulting from the Iran war would last only weeks. Appearing on multiple TV talk shows, Energy Secretary ChrisWright and U.S. Ambassador to the United Nations MikeWaltz said a waiver issued last week to allow Indian purchases of Russian oil would alleviate pressure on the global market. “It’s a 30-day pause to allow, which is just kind of com- mon sense, to allow the millions and millions of barrels of oil that are sitting out on ships to go to Indian refineries,” Waltz said on NBC’s “Meet the Press.” Wright told CNN’s “State of the Union” that the waiver can help “tamp this fear of shortage of oil, tamp the price spikes and the concerns we see in the marketplace.” With the war now in its second week and no end in sight, Americans are grappling with higher prices at the pump, a new complicating factor for the U.S. economy, which unexpectedly lost 92,000 jobs in February. As of Friday, the national average price for regular gasoline stood at $3.32 a gallon, up 11% from the previ- ous week and the highest since September 2024, accord- ing to data from the motorists group AAA. Diesel was at $4.33, up 15% from a week ago, surging to the highest level since November 2023. “We believe this is a small price to pay to get to a world where energy prices are returned back to where they were,”Wright said on the “Fox News Sunday” program. There is no shortage of oil or natural gas, saidWright, who asserted that the price increases are based on “fear and perception” that the Iran operation will be a drawn- out affair. “But it won’t be,”Wright said, echoing President Don- ald Trump’s prediction that the war will last weeks rather than months. Trump, in a Reuters interview on Thursday, predicted that gasoline prices will “drop very rapidly” when the war is over. Senator John Kennedy, a Louisiana Republican, criti- cized energy speculators. “The oil prices have gone up because you’ve got a bunch of oil traders out there in their Gucci loafers, with their caramel Frappuccinos who are bidding up the price,” Kennedy said on “Fox News Sunday.” Political analysts say a persistent rise in gasoline prices could hurt Republicans in the November midterm elec- tions when control of the U.S. Congress will be at stake. A Reuters/Ipsos poll last month found that most respon- dents rejected Trump’s characterization of the economy as “booming.” -Reuters US Energy Chief Defends Waiver On Russian Oil Sanctions; Brings Some Relief To India, Others By Katharine Jackson and CurtisWilliams Suez Fury crude oil tanker is seen anchored at the terminal Kozmino in Nakhodka Bay near the port city of Nakhodka, Russia, December 4, 2022. PHOTO:REUTERS/TATIANA MEEL/FILE PHOTO