Day 17 of the war: Surging crude prices and severe shipping bottlenecks in the Strait of Hormuz are squeezing India’s economy across multiple sectors, threatening to balloon the country's import bill while forcing exporters and major industries to grapple with skyrocketing freight costs and critical supply chain disruptions.

Import bills surge?

India’s oil import bill could balloon by as much as USD 64 bn if oil prices average at USD 110-115 per bbl this fiscal year, according to rating agency ICRA. Sustained increases in crude prices could widen India’s current account deficit (CAD) — a USD 10 / bbl rise in average crude prices could widen India’s CAD by about 30-40 basis points (bps), ICRA notes.

Why it matters: The country relies on imports for about 90% of its crude oil, 60% of its liquefied petroleum gas, and roughly half of its liquefied natural gas demand. Authorities have begun prioritizing household energy supply, cutting gas allocations to industrial users while urging consumers to avoid panic buying.

Macro pressures mount: For every USD 10 increase in crude prices, India’s annual import costs could surge by roughly USD 12-15 bn, DSP Mutual Fund estimates. Costlier crude could further weaken the INR and increase inflation — a USD 10 rise in oil prices would raise the wholesale inflation index by 100 bps and consumer price index by 60 bps, according to ICRA. If oil prices stay above USD 120 bbl through FY 2027, India’s CAD is estimated to rise beyond 3% of the country’s GDP.

India diversifies fertilizer sourcing

India is looking to increase fertilizer sourcing from Russia, Morocco, China, Indonesia, and Belarus as disruptions in the Gulf impact supplies for the farming sector, Mint reports. The move comes ahead of the sowing season starting June, as authorities look to reduce exposure to potential disruptions along Gulf shipping routes.

IN CONTEXT- India relies heavily on Gulf producers for fertilizer imports. Roughly 70% of India’s urea shipments transit the Strait of Hormuz, making the route critical for fertilizer supplies. Of the 5.64 mn tonnes of urea imported last financial year, about 70% came from Oman, Saudi Arabia, the UAE, and Bahrain.

Russia and China have already emerged as key urea suppliers this financial year, while sourcing agreements for phosphatic fertilizers have also been expanded.

Shipping cost shock hits exporters

India’s exporters are facing severe disruption as nearly 70% of outbound shipments have been affected by the Strait of Hormuz blockade, Hindu Businessline reports. Freight rates have surged as much as 300%, while longer routes via the Cape of Good Hope are extending transit times and raising ins. and fuel surcharges.

Industry estimates: Nearly 70% of outbound shipments have been affected by vessel suspensions, cargo backlogs, and rerouted voyages. Most major shipping lines have paused services, leaving a handful of operators moving cargo, exporters told the outlet. Companies are grappling with rising demurrage, storage fees, and uncertainty over consignments in transit.

Small biz takes the hit: Efforts to divert shipments to alternative markets have proven difficult, as exporters, particularly small and medium enterprises, lack the capacity to redirect cargo or absorb the surging logistics costs.

MEANWHILE- The Indian government is considering temporary relief measures for exporters, similar to those implemented during the pandemic, Bloomberg reports, citing unnamed sources. These measures could include extended deadlines for repatriating export proceeds, easing bank overdraft rules, and granting moratoriums on loan repayments. Partial compensation for higher freight, demurrage, and conflict surcharges are also being considered to ease the situation for exporters.

Hindalco pauses extrusion output after gas supply disruption

India-based metals producer Hindalco Industries, part of the Aditya Birla Group, has paused production of some extruded aluminum products after gas supply disruptions, Reuters reports.

Why it matters: The company issued a force majeure notice to customers on 11 March following supply interruptions from gas providers. Extruded aluminum products — used in construction, electric vehicles, electronics, and solar equipment — require gas-fired heating during manufacturing.

Limited impact: Hindalco later clarified that the notice followed force majeure declarations from certain gas suppliers and was issued to alert customers about potential disruption affecting part of its extrusion segment.

Drone strike in Oman kills two Indian workers

Two Indian nationals were killed and 10 others were injured after drones struck an industrial zone in Sohar, Oman — bringing the total number of Indians killed during the war to five, Times of India reports. Some 150k Indians have returned from the Gulf, a tiny fraction of some 9 mn working in the region, the report adds.

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