As INR hits record low, Modi optimistic about economic fundamentals, reserves

2026-03-23 - 10:50

MUMBAI: The fundamentals of the Indian economy are strong and the country has adequate availability of petroleum, fertilisers and coal to weather trade and energy disruptions caused by the US-Israel war on Iran, Indian Prime Minister Narendra Modi told parliament’s lower house on Monday. The conflict, which began last month, has disrupted sectors from air travel to shipping and gas supplies, including by the near-closure of the Strait of Hormuz, which serves as a conduit for 40 per cent of India’s crude oil imports. His statements comes as the Indian rupee fell to a record low of 93.84 against the US Dollar, eclipsing its previous low of 93.7350 hit on Friday. The rupee, among the currencies most exposed to sustained oil price increases, has weakened about 3pc on the back of the escalating conflict, stoking worries over sustained disruption of energy supplies, threatening the outlook for Asia’s third-largest economy. Modi told the Lower House of Parliament that India has sufficient petroleum availability, with strategic reserves currently exceeding 5.3 million metric tons, and work underway to create reserves of another 6.5 million metric tons, Modi told the lower house. “The inherent strength of India’s economic fundamentals has ... provided significant support to the nation during this period,” he said. Adequate arrangements have also been made for fertilisers supply for the summer sowing season that starts in June-July, and for coal to meet the rising demand for electricity as temperatures rise, he added. The South Asian country, the world’s most populous and fastest growing major economy, still relies on coal for three-fourths of its electricity generation, even as it ramps up renewable energy generation at a record pace. The Indian economy is estimated to grow by 7.6pc in the fiscal year ending March 2026, the National Statistics Office said last month. It is projected to grow between 7pc and 7.4pc in FY27. Analysts say a prolonged crisis in the Gulf region could significantly dampen India’s growth in FY27 due to surging energy costs and supply chain disruptions. Modi had emphasised the importance of ensuring shipping lanes remain open and secure despite the war during a conversation with Iran’s President Masoud Pezeshkian on Saturday. Asian currencies were down between 0.1pc to 0.8pc as hopes for an off-ramp to hostilities dimmed over the weekend with Washington and Tehran trading threats as the war entered its fourth week. The conflict has boosted oil prices by over 50pc this month. The International Energy Agency has said the crisis is worse than the two oil shocks of the 1970s put together. BofA Global Research expects the rupee to trade at 94 by June 2026, versus its forecast of 89 earlier, assuming that the ongoing crisis resolves in a few weeks.