Opinion In a warring world, how India can brace for a crisis that goes beyond oil

In 2022-23, after Russia’s invasion of Ukraine, India’s current account deficit (CAD) hit a 10-year high of $67.1 billion, amid skyrocketing global oil, fertiliser and food prices. But the situation was relatively manageable, thanks to net capital inflows of $57.9 billion and some drawdown of official foreign exchange reserves. As international commodity prices eased and India started buying discounted Russian crude, the CAD narrowed to $26.1 billion, even as net capital flows soared to $89.8 billion, in 2023-24. The US-Israel versus Iran war offers no such relief. Capital flows fell to $18 billion in 2024-25 and have turned negative (minus $581 million) for the April-December 2025 period. India, thus, had a capital account problem before this war began: Foreign portfolio investors made net sales of $18.9 billion in Indian equities last year and $3.8 billion so far in 2026.

The current war, moreover, unlike Russia-Ukraine, is being fought far closer to home. India’s exports of goods to the Gulf Cooperation Council (GCC) and other West Asian countries were valued at over $65.5 billion, and imports, mainly of petroleum and fertilisers, at $154.6 billion in 2024-25. Further, there are nearly 8.9 million overseas Indians in the six GCC states alone and they account for some 38 per cent of the private remittances of $135.4 billion received by the country during the last fiscal. The GCC countries have also emerged as a major source of foreign direct investment into India, across sectors, from energy and infrastructure to retail and data centres. Given the level of integration and flow of goods, labour and capital, any cataclysmic event in this region has huge consequences for India. The impact would be both on merchandise trade (especially from higher imported oil and gas prices) and invisibles (from lower remittance receipts), adding to the already weak capital flows.

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India will seek to soften the blow for now by sourcing more Russian oil; that would have happened even without the 30-day “temporary waiver” from US sanctions. But this is a crisis that goes beyond oil, with the potential for dislocation far greater than from Russia-Ukraine. West Asia is today part of India’s extended neighbourhood, vital to its energy security and hosting a massive diaspora contributing equally to the region’s development and economic stability to families back home. India cannot afford to be indifferent. The Narendra Modi government must take the Opposition and Parliament into confidence, like it did during Covid and Operation Sindoor.