Former RBI Governor Raghuram Rajan states that the West Asia conflict could drive oil prices to $150 or $200 per barrel if it continues for another month. This price increase poses risks to the global economy, including stagflation and high interest rates. India faces vulnerability as 50 per cent of crude oil imports and 85 per cent of LPG supplies depend on the Strait of Hormuz. Rajan recommends strategic resilience and diversification of oil sources rather than complete self-reliance. He identifies pharmaceuticals and semiconductors as sectors requiring buffer stocks and alternative supply chains. Specifically, he suggests diversifying active pharmaceutical ingredient sources and building chip reserves. Rajan notes that energy subsidies exceeding one lakh crore rupees are fiscally unsustainable during prolonged crises. He characterizes the current geopolitical environment as a world without order and calls for medium-term strategic responses to protect the balance of payments and inflation levels. These measures include price adjustments and the development of production capabilities to mitigate energy and supply chain disruptions.
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