US Russia Sanctions Bill Raises Stakes for India Trade Talks, Says Economist
A US Senate bill targeting buyers of Russian crude makes an India-US trade deal more critical and could raise India's import bill if supplies are disrupted.
The recent US Senate legislation aimed at penalizing purchasers of Russian crude has made a successful India-US trade agreement more crucial than ever, according to Bank of Baroda's Chief Economist, Madan Sabnavis. The bill, which passed with an 86-11 vote, proposes tariffs of up to 100 percent on countries like India and China that continue to buy Russian oil and gas.
Sabnavis noted that India's next steps on crude imports will depend heavily on the outcome of its ongoing negotiations with Washington. "It becomes even more critical how we negotiate a deal with the USA in light of this development," he said, expressing hope that a solution would be found.
Currently, there is no immediate cause for alarm, as crude prices remain stable at around $80 per barrel. However, the economist cautioned that a renewed escalation in the conflict or a disruption to supply chains could have a significant impact on India's external finances. "The issue will be if war escalates and supplies are blocked. Import bill will go up and put pressure on rupee," he warned.
While Foreign Currency Non-Resident (FCNR) deposits could offer some counterbalance, Sabnavis stated that the current account deficit (CAD) would still be affected. He estimated the impact on CAD could be around 0.1-0.2 percent of GDP, which is not excessively high at present. The bill also identifies China, Slovakia, Hungary, and Azerbaijan as countries of concern regarding Russian energy purchases, adding a layer of complexity to the ongoing trade discussions between India and the US.