{"id":537400,"date":"2026-03-21T21:33:33","date_gmt":"2026-03-21T21:33:33","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/537400\/"},"modified":"2026-03-21T21:33:33","modified_gmt":"2026-03-21T21:33:33","slug":"world-economy-in-serious-trouble-india-vulnerable-warns-former-reserve-bank-of-india-governor-raghuram-rajan","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/537400\/","title":{"rendered":"World economy in serious trouble, India vulnerable, warns former Reserve Bank of India Governor Raghuram Rajan"},"content":{"rendered":"

Former RBI Governor Raghuram Rajan has issued a stark warning on the global economic fallout of the ongoing US-Israeli war against Iran, cautioning that a prolonged conflict could trigger an unprecedented oil shock<\/a>, destabilise financial systems, and leave oil-dependent economies like India particularly exposed<\/a>. As the war enters its third week, Rajan underlined that the trajectory of the global economy now hinges critically on how long the conflict persists.<\/p>\n

Read Full Story<\/p>\n

Speaking to India Today\u2019s Rajdeep Sardesai, Rajan said, \u201cI think the important question is how long it lasts\u201d, warning that even a short conflict has already caused disrupted energy for about 20% of the total production of energy sources across the world.<\/p>\n

While some countries have temporarily cushioned the blow using reserves, he stressed that \u201cthe longer this goes on the more impact it will have.\u201d<\/p>\n

Rajan flagged a worst-case scenario where supply disruptions force a sharp correction in demand.<\/p>\n

\u201cIf you’re trying to adjust to the fact that 15 to 20% of world energy sources are shut in, you have to have tremendous demand destruction,\u201d he said, adding that \u201coil prices will be in the $150, $200 a barrel range.\u201d<\/p>\n

Such levels, he noted, are largely uncharted territory and could trigger widespread economic stress<\/a>. \u201cThe world economy is in serious trouble\u201d if the war extends for another month, he cautioned.<\/p>\n

The crisis is being exacerbated by vulnerabilities around the Strait of Hormuz, a critical chokepoint through which a significant share of global oil and gas flows.<\/p>\n

Asian economies\u2014including India, China, Japan and South Korea\u2014face the highest exposure.<\/p>\n

Rajan explained that disruptions here would not remain regional. \u201cWhat happens in Asia doesn’t stay in Asia prices will show up everywhere,\u201d he said, including in relatively insulated economies like the US.<\/p>\n

Beyond energy markets, Rajan warned of broader macroeconomic consequences.<\/p>\n

High oil prices could fuel inflation at a time when many economies are already struggling with elevated price pressures. \u201cWith high energy prices, interest rates have to stay higher to combat inflation, and economies aren’t positioned for that,\u201d he argued, adding that rising borrowing costs and existing fiscal deficits could trigger \u201crisks from the financial sector if this lasts much longer.\u201d<\/p>\n

\u2018INDIA PARTICULARLY VULNERABLE\u2019<\/p>\n

India, he emphasised, is particularly vulnerable due to its heavy reliance on imported crude<\/a>.<\/p>\n

\u201cEvery government is vulnerable, because oil prices affect so much of the economy,\u201d Rajan said, while acknowledging that India\u2019s inflation-targeting framework has so far helped anchor expectations.<\/p>\n

However, sustained price shocks would make it increasingly difficult to contain inflation within acceptable bounds.<\/p>\n

He also cautioned against prolonged state intervention to shield consumers.<\/p>\n

\u201cIndia simply cannot subsidise oil on a semi-permanent basis,\u201d Rajan warned, arguing that if high prices persist, \u201cthe consumer will have to adjust, the farmer will have to adjust, producers will have to adjust.\u201d<\/p>\n

He added that excessive subsidies would strain fiscal balances, making them unsustainable over time.<\/p>\n

Highlighting the external sector risks, Rajan noted that rising oil prices could sharply widen India\u2019s current account deficit.<\/p>\n

Even a moderate increase in crude prices has significant implications, and a sustained surge could compound pressures<\/a> on the rupee and overall macroeconomic stability.<\/p>\n

Looking ahead, Rajan called for a strategic rethink. He advocated expanding strategic petroleum reserves, diversifying energy sources, and building resilience across critical supply chains.<\/p>\n

\u201cWe need a strategic resilience plan across the country across many inputs,\u201d he said, pointing to vulnerabilities in sectors like pharmaceuticals and semiconductors.<\/p>\n

Conclusively, Rajan described the conflict as a \u201cwake-up call\u201d for policymakers worldwide. While short-term buffers may help, he stressed that one simply cannot subsidise their way out of this crisis. If the war drags on, economies will have to make hard adjustments, with oil prices, inflation, and global growth all hanging in the balance.<\/p>\n

– Ends<\/p>\n

Published On: <\/p>\n

Mar 21, 2026 01:51 IST<\/p>\n","protected":false},"excerpt":{"rendered":"Former RBI Governor Raghuram Rajan has issued a stark warning on the global economic fallout of the ongoing…\n","protected":false},"author":2,"featured_media":537401,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[28,224062,101,10954,9509,64006,2402,4011,238242,19357,240858,228030],"class_list":["post-537400","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-current-account-deficit","tag-economy","tag-energy-crisis","tag-global-economy","tag-india-economy","tag-inflation","tag-oil-prices","tag-oil-shock","tag-raghuram-rajan","tag-strategic-petroleum-reserves","tag-us-israel-iran-war"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/537400","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=537400"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/537400\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/537401"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=537400"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=537400"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=537400"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}