- Morgan Stanley warns that oil prices sustained at $110 per barrel could destabilize India’s economy.
- India, as one of the largest oil consumers in the world, is highly exposed to rising crude prices.
- A $10 increase in oil prices could lead to a 50 basis point increase in inflation and a 30 basis point widening of the current account deficit.
- Oil prices above $110 per barrel may result in higher domestic fuel prices and second-round inflationary effects.
- In such a scenario, India’s currency could face depreciation pressures, prompting the Reserve Bank of India to resume raising interest rates.