New Delhi (Sputnik): The US threat to end waivers on sanctions against the purchase of Iranian oil, previously accorded to selected countries including India, has started to pinch India, with its currency witnessing a slump of Rs 0.39 to a low of 70.25 against the US dollar, according to a report in the Indian Express.
The media outlet quoted analysts opining that a mere 10 percent spike in crude prices could widen the Indian current account deficit situation by 0.40 percent.
READ MORE: India, China May Snub Trump's Sanctions, Continue to Buy Iranian Oil – Analysts
This could result in a depreciation of India's rupee in the range of a whopping 3 to 4 percent. Inflation would also go up, the analysts further quoted in the media report.
"The currency will be the first point of contact as the trade deficit and CAD will widen. FII, FDI etc. would need to balance out this deficit or else the balance of payments would be under pressure. The sharp increase in import bill will hence tend to put pressure on the rupee. The rupee will be under pressure on account of both sentiment, which will drive the currency in the short run, and dollar outflows, which will be the natural outcome of higher oil prices", CARE Ratings' report read.
READ MORE: Iran Oil: China Warns US Sanctions Will Whip Up Turmoil in Middle East
"Sustained increase in the price in the range of $70-75/barrel or higher can move the rupee down by 3-4% on an annual basis given that the dollar has already started strengthening in the world market", the report added.
