DC Edit | Weaker Rupee Huge Jolt To Eco

A few months ago, India appeared poised to overtake Japan as the world’s fourth-largest economy — a symbolic milestone reflecting its steady growth trajectory. However, that optimism has now been jolted by external shocks. The sudden escalation of hostilities between the United States and Iran has sent global crude oil prices soaring, exposing once again India’s structural vulnerability: its heavy dependence on imported energy, foreign institutional investors (FIIs) and foreign remittances. A surge in global crude prices has widened India’s current account deficit, and global uncertainty forced FIIs to exit emerging markets like India, which together exerted pressure on foreign exchange reserves, and dragged the rupee to a historic low of 95 against the dollar. A weaker rupee has lowered the valuation of the India economy in dollar terms, relegating the Indian economy to the sixth rank after the United Kingdom. India is ranked sixth, with a projected 2026-27 GDP of $4.15 trillion, behind the USA, China, Germany, Japan and the UK. Though the pecking order of the economies is of little relevance to the real economy, it enhances the collective pride of the country. India had displaced the United Kingdom as the sixth largest economy in 2016 when the pound sterling was weakened after Brexit. Similarly, the currency valuation displaced India with the UK. Whenever the crude oil price shot up, India suffered economically. The country is witnessing the same trend repeating. Despite the change in the global pecking order in the GDP, India remains one of the world’s fastest-growing major economies, with strong 6-7 per cent growth projections, aiming for the third spot by 2028. However, any economic growth that India may achieve will remain fragile if it depends on imported crude oil. The government should adopt new technologies to move away as much as possible from imported crude oil.



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