Gita Gopinath decodes Iran war's impact on India and global economy

In an exclusive interview with India Today Consulting Editor Rajdeep Sardesai, Harvard University professor and former IMF Deputy Managing Director Gita Gopinath discussed the economic implications of the ongoing Iran conflict. She noted that the disruption represents a significant challenge, stating, "It's the biggest oil shock to the world." Gopinath explained that if the conflict extends into May or June, global growth could drop to two and a half percent. For India, she highlighted the dual pressures of higher oil import bills and exchange rate volatility. She advised against using foreign exchange reserves to defend the rupee, suggesting the currency should be allowed to adjust. Gopinath emphasised that "this is a negative shock for the Indian economy" and warned that it is not sustainable for the government to subsidise fuel prices indefinitely. To build resilience, she recommended focusing on domestic reforms, infrastructure development, and energy diversification, noting, "Energy independence is going to be very critical for India." She also pointed out that the current global environment requires policymakers to adapt to heightened uncertainty.