Conflicts and macro threaten India's firewalls

Policy agility, prudence, and resilience will be key for sustained growth in a rapidly changing global landscape

Over the last two months, geopolitical and market developments have emerged as risks to India’s economic outlook. 

External shocks
 

Geopolitically, the Israel-Hamas conflict continues and there is uncertainty over whether this will escalate. So far, Brent crude oil prices have risen marginally to build some geopolitical risk premium, but not a full escalation. Opec+ production cuts had already set a floor, and if the West Asia conflict escalates, then crude oil prices could rise further.

On the market front, US long-end government bond yields have drifted higher, with 10-year yields breaching 5 per cent for the first time since 2007. This selloff