Analysts had predicted that the end of the sanctions waiver regime for buying oil from Iran would result in the strengthening of the US dollar. India, being a large importer of Iranian oil, is facing the heat, with a depreciating currency and a real possibility of retail inflation going up.
New Delhi (Sputnik): The US threat to end waivers on sanctions against the purchase of Iranian oil, previously accorded to selected countries including India, has started to pinch India, with its currency witnessing a slump of Rs 0.39 to a low of 70.25 against the US dollar, according to a report in the Indian Express.
The media outlet quoted analysts opining that a mere 10 percent spike in crude prices could widen the Indian current account deficit situation by 0.40 percent.
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This could result in a depreciation of India’s rupee in the range of a whopping 3 to 4 percent. Inflation would also go up, the analysts further quoted in the media report.
International credit rating agency CARE Ratings did a detailed assessment report on the impact of the US’ anti-Iran sanctions after the sanctions waiver regime, which is expected to be effective from 3 May.
“The currency will be the first point of contact as the trade deficit and CAD will widen. FII, FDI etc. would need to balance out this deficit or else the balance of payments would be under pressure. The sharp increase in import bill will hence tend to put pressure on the rupee. The rupee will be under pressure on account of both sentiment, which will drive the currency in the short run, and dollar outflows, which will be the natural outcome of higher oil prices”, CARE Ratings’ report read.
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“Sustained increase in the price in the range of $70-75/barrel or higher can move the rupee down by 3-4% on an annual basis given that the dollar has already started strengthening in the world market”, the report added.