Tighten your seatbelt us sanctions on Iran kick in today it is going to be a rough ride ahead

November is not a kind of month on the 15 November 16 54 tried to blow up British houses of Parliament providing the 17th century Rhythm that kind of the Britain still recite as the dense around the beneficiary every 5th November remember remember the 5th of November gunpowder treason and Plot.

What does this have to do with India in the 21st century??
prima facie nothing but give the protect combinations of our critical dependence on imported oil and the oil markets unique ability to make or Mar our microeconomic fundamental and US coil and banking sanction against the Iran king in the today one could be forgiven for coming up with a letter day version of the old English rhythm.

Remember remember the 5th of November oil powder sense and Trump.

Of course comparing transaction with guy power attempt to kill the British king is a straight but today the economy not royalty is King and US action against Iran the world's sixth largest Oil producer and third largest supplier has the potential to kill our hands and economic recovery.

Huawei why because the US has offered India whether it is only a partial one continent on our cutting back significantly on purchases from Iran.

Moreover it is only till March 2019.

also whatever the toadies might say about ramping a production there is no away Global supply can increase commensurately to compensate for the exit of such a large supplier from the Global market.

exports from Iran have already fall and supply and with a fall further after today .

The US effort after all is to bring Iran oil export down to 0.

Dissension Kumar banking transaction to home but it is also clear will be able to get around them as in the past.

remember oil is a global commodity its price is determined by global demand and supply so any fall in supply particularly large fall is bound to result in a rise in global oil prices.

what is not clear is only the extent to which prices will rise and that unfortunately is singularity bad news for India.

file is the one commodity that has the ability to affect three key macroeconomic variable that have a critical bearing on our economic oil being inflation current account deficit and fiscal deficit.

the fact that we all are dependent on oil import for close to 80% of our energy needs 50 influences on the prices of oil and have to pay our imports in the dollar only market metal worse.

take inflation a height in a global price will immediately impact the wider consumption basket directly through higher energy prices and indirectly through higher cost of transportation power and a whole host of items where energy is a key input.

Ultimately there are just too away government can deal with rising oil prices.

Haider it can allow domestic prices to rise on the shock of higher prices by allowing the public exchequer to take the hit.

the first is a type of cell in a democracy not only does higher inflation hard consumer it hurt before the most.

that leaves us with the second option subsidies this is not much better how I tried to make sound the reality is there is no free lunch.

someone has to pay the higher prices if the consumer cannot be X to pay more the have prices has to be observed by the government Idea through lower taxes or through the outside subsidies.

the only differences is the pain is immediate in case of A pass through what is failed little if the government observed because then it has to borrow more to meet its higher deficit as a result of Hawa Texas and higher expenditure.

unfortunately any attempt to cousin the impact on consumer will necessarily impact the government financial advisory.

the current account deficit likewise is adversely affected by the hair oil prices not only do we impact close to 80% of our oil requirement this import have to be paid for the dollar there for any decrease in the prices of oil increases our import wheel and wideness both the trade deficit the differences between the same port and export and this difference current account deficit of which the trade deficit is an important component.

with the current account deficit already having previously close to the danger mark of 2. 5 % of GDP we can ill afford a further widening of current account deficit.

with the current account deficit even if the higher it is to be financial through the higher capital inflow it is not the sustainable.

something will have to give and that something is the exchange rate the equivalent mechanism.

Daru Pee will have to to depreciate against the dollar market imported itself more item for expensive and odds heading to inflammatory preserve it to the preservation.

in a scenario where all the three main macroeconomic pillar of the economy or adversely affected it is a no brainer that economic growth will also suffer.

get ready for a bumpy ride once the economic yes it is going to be ra Friday head post us sanction on Iran tighten your seatbelt.
Thank you very much for listen.