However, the conflict is “unlikely to pose any major risk yet,” and India‘s strong macroeconomic fundamentals will hold it in good stead to weather any such crisis without significant bruises, the official told ET.
US recession RISK
Any potential recession in the US would be a bigger worry, he said, adding, however, that “it’s a bit early in the day to sound that out conclusively.” The US has been India’s largest export destination, accounting for almost 18% ($78 billion) of the country’s merchandise shipments in FY24.
“Unless the conflict theatre in West Asia widens substantially for a protracted period, which seems unlikely at the moment, the impact on India won’t be significant. Still, we have to wait and watch carefully,” the official said.Indian stocks plunged on Monday tracking a global sell-off and the rupee depreciated against the dollar as worries about the US recession following weak manufacturing and a spike in unemployment further weighed down investor sentiments already battered by the simmering West Asian conflict. The benchmark Sensex and Nifty nosedived 2.74% and 2.68%, respectively, on Monday. The rupee weakened 0.1% to close at a fresh low of 83.85 against the greenback, as the dollar index strengthened with investors flocking to safe haven assets.Shipping costs, particularly, could be under pressure, adding to exporters’ woes if Iran-backed Houthi rebels again step up attacks on vessels across the Red Sea and the Mediterranean.