The 2008 crisis was largely financial, while the 2013 episode was mainly about currency instability and capital flight. Today’s challenge is broader. For an import-dependent economy like India, the impact spreads quickly across transport, agriculture, manufacturing and household expenses. The pressure is already visible in economic indicators. The rupee has weakened by about 11 per cent against the dollar over the past year, while foreign portfolio investors have pulled out more than USD 21 billion this calendar year, the highest sustained outflow since 1991.
Weakened rupee, increasing inflation
India’s import bill is also swelling rapidly. Combined imports of crude oil, petroleum products, gold, silver and fertilisers reached roughly USD 281 billion in FY26, accounting for more than one-third of India’s total merchandise imports. The government has started responding through selective controls, to discourage non-essential imports and reduce pressure on foreign exchange reserves. Fuel prices are also expected to rise gradually in the coming months. Policymakers understand that sharp increases in petrol, diesel or LPG prices can quickly spread inflation through transport and logistics costs. Despite these pressures, India still has important advantages. Unlike many countries that import refined fuels directly, India has one of the world’s largest refining sectors and maintains a refining surplus. Discounted crude oil imports from Russia have also helped cushion part of the shock.
Still, the broader lesson is clear. Wars in Eastern Europe and West Asia are no longer distant geopolitical events for India. They are directly influencing inflation, currency stability, industrial costs and household consumption across the economy. India needs to work on greater domestic resilience. -Author is the Founder of GTRI
