NEW DELHI, April 30 (Xinhua) -- India's finance ministry has warned that the ongoing crisis in the Middle East could trigger a supply shock for the country's economy and fuel inflation if disruptions in oil supplies persist.
The predictions were made in the ministry's monthly economic review for April, released on Wednesday.
According to the ministry, damages to oil and gas production and supply infrastructure in the Gulf region could take several months to repair.
"If such a gradual recovery is not supported by a good Kharif output (a weather shock/below normal monsoon as predicted by the IMD (India Meteorological Department) -- possible El Nino conditions), it is likely that the price shock felt at the headline inflation might spill over to the core measure through the cost-push channel," the ministry report said.
Kharif crops are monsoon crops. It refers to agricultural plants sown at the beginning of the rainy season (June-July) and harvested in autumn (September-October).
The report underlines that it has been 60 days since the conflict in the Middle East began on Feb. 28.
The ministry observed that a supply shock is already visible, with rising prices and concerns over demand compression. Higher input costs, particularly in the petroleum sector, are expected to affect multiple industries.
The report states that beyond the production structures, the conflict has seriously dented investors' confidence, disproportionately affecting EMDEs (emerging market and developing economies), including India.
"The consequent weakening of the rupee is another pressure point for domestic inflation, as that could raise import prices," the report said. ■
