The ongoing US-Iran war has already made a significant dent in the country’s foreign exchange reserves, making them poorer by USD 34 billion in the last two months.
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The West Asian crisis has posed a big challenge to the Indian economy, which is striving hard to maintain its impressive growth rate, among the fastest in the world. The Indian economy will have to grow by more than eight per cent per annum to achieve its dream of becoming a developed nation. The country was progressing well towards realising the goal over the last couple of years notwithstanding global uncertainties like the pandemic, the Eastern European crisis, etc. But the ongoing US-Iran war, especially the blocking of the Hormuz Strait through which India meets sixty per cent of its energy demand, has put the country in deep trouble. The disruption has not only hampered the usual energy supply but has also increased hardships for the people by making crude and essential commodities costlier, threatening to limit annual economic growth to a mere five per cent or below depending on the length of the war. For records, the ongoing war has already made a significant dent in the country’s foreign exchange reserves, making them poorer by USD 34 billion in the last two months, and made the Indian rupee unstable in the market, which has now touched a record low against the dollar.
In this context, arresting the fall of the Indian rupee will be our priority. But the job is easier said than done as none of the measures being contemplated by experts is expected to deliver the desired result. This is why, without mincing words, chairman of the Sixteenth Finance Commission Dr. Arvind Pangariya has stated that the rupee will recover only when crude prices in the international market stabilise, along with increased foreign investment. He has advised all concerned not to worry much about the falling rupee, even if it touches the three-digit mark. But the majority of economists prefer active intervention by the government with an eye to lessening the burden on the common people. They have wholeheartedly supported the austerity measures announced by Prime Minister Narendra Modi and want people to follow them in true letter and spirit to prevent the crisis from affecting our economy further.
To make the endeavour a success, the government should come out with a definite plan that will not only allow us to tame the ongoing crisis but will also make the country resilient to any such future crisis. In this context, it must be mentioned here that apart from meeting 88 per cent of its energy requirement through imports, India also imports 90 per cent of phosphate and 25 per cent of urea fertilisers essential for the survival of agriculture. Thus, along with solving the energy crisis, the country will have to draw up a fresh plan regarding the supply of fertilisers to farmers to ensure that food production is not hampered. It goes without saying that the present crisis may derail the country from its growth path if not dealt with properly. So, India will have to walk cautiously in these troubled days to keep its economy afloat.