A sustained rise in crude oil prices to $100–110 per barrel could significantly widen India’s trade deficit, warns Soumya Kanti Ghosh, Group Chief Economic Advisor at the State Bank of India (SBI), highlighting the growing macroeconomic risks from elevated energy costs.Ghosh expects the Indian crude basket to remain in this higher range for the next 2-3 months, a sharp jump from the roughly $70 per barrel average seen in FY26 so far. The implications for India’s import bill are substantial. “Every one-dollar increase in barrel leads to around $1.5–2 billion increase in oil imports,” he said, adding that this could translate into an additional $30–40 billion in import costs under the baseline scenario. Unless exports rise proportionately, he sees a widening trade deficit as the most likely outcome.
On precious metals, Ghosh struck a contrasting note, indicating that gold and silver may be headed for correction. He observed that metals have not behaved as expected, failing to serve as an effective hedge against inflation or geopolitical stress.
Watch the full conversation here
A key reason, he said, is the strength of the US dollar. “Earlier we were having a story of debasing of the US dollar, but suddenly after the war started, the US dollar… has now been hovering around 100 or upwards,” he explained.The stronger dollar, coupled with rising US bond yields, particularly the 10-year yield nearing 4.5%, has reduced the appeal of non-yielding assets like gold and silver. In times of conflict, investors tend to favour dollar-denominated assets, putting additional pressure on precious metals.Also Read: Gold, silver turn risk assets; PACE 360’s Amit Goel sees rally before crashGhosh also dismissed the recent uptick in gold and silver prices as temporary, driven largely by expectations of a quick resolution to the ongoing conflict. “If the war is not yet over, the strengthening of the dollar will not be over, and the hardening of the US interest rates… will not also be over,” he said, suggesting that metals could see a correction from current levels. He added that central bank gold sales to meet costs have also contributed to the weakness.Also Read: Asian Paints raises prices by 7–8%; Nuvama expects more hikes if crude holds at $90–95/bblLooking ahead, Ghosh expects this correction to play out in the near term, before metals stabilise and potentially move higher again. “In the medium term, there will be some retreat in the metal prices from the current level before it starts to move up again, possibly in a couple of months,” he said.Stay updated with the latest developments in the Iran–US–Israel conflict—follow CNBCTV18.com’s live blog here.
Source link
