Morgan Stanley estimates a sustained oil price of $110 a barrel could undermine India’s economic stability, likely forcing the central bank to resume hiking interest rates.
As the world’s third-biggest consumer of oil, India is one of the most exposed economies in Asia to rising crude prices. A $10 increase in oil prices boosts inflation by 50 basis points and contributes to a 30 basis-point widening in the current account balance, Morgan Stanley’s economists estimate.
Oil above $110 a barrel would be destabilizing for India’s economy, the investment bank said, resulting in higher domestic fuel prices and second-round inflationary effects.
