Saturday morning found the public policy pulpit betwixt joy and jitters. The headlines gleamed with a record Rs 2.43-lakh-crore GST collection in April. The data presented the sarkar with a serious dilemma. Should they celebrate the optics of a record harvest, or worry about the rising cost of imports inflicted by Trump’s war in West Asia? Data shows that GST on domestic sales grew 4.3 percent, while import-related GST collections surged 25.8 percent. The higher cost of imports will seep like oil, setting fire to individual and institutional budgets.
The Hormuz Strait is the jugular vein for Asian economies. Over 20 million barrels of crude oil and related products move through the strait daily in normal times. Its closure has cramped availability and ramped up prices. The resultant shortage has seen the benchmark Brent prices yo-yo this month between $100 and $128 a barrel. Every dollar’s increase pushes up the import bill and widens the current account gap. It is estimated that the rise in crude prices from pre-war $65 to over $100 will result in an annual increase of $70 billion to India’s crude import bill.
Thanks to the poll-piper, the government did not hike prices. That may not sustain as the cost of subsidies for oil, gas and fertilisers will wreck the carefully-constructed macro fundamentals. Unsurprisingly, there is buzz about a ‘security’ cess or a ‘war’ cess. While that transitions through the corridors of economics and politics, the currency is already taking a major hit despite the steps taken by the RBI—tumbling from Rs 84.66 to the US dollar in May 2025 to Rs 95.20 this week.
The rupee is trapped in a quandary. Its slide has triggered the exit of foreign institutional investors—their net sales, at Rs 2 lakh crore or roughly $20 billion in the first four months of the year, are higher than their sales in all of 2025. Returns on India’s benchmark Nifty50—both year-to-date and year-on-year—are lower than what is offered by banks for fixed deposits. Despite the fall in the index—over 8 percent this year—HSBC, Goldman Sachs, J P Morgan Chase, Bernstein and UBS saw it fit to downgrade Indian stocks to underweight or neutral. The slide of the rupee causes a flight to safety and that, in turn, causes a further fall. The rupee’s state is both the cause and the consequence of its weakness.
The rupee also faces the threat of slowing or shrinking remittances from $135 billion received last year. India rescued and repatriated 5.72 lakh Indians via Operation Samudra Setu II as Gulf projects stalled under drone threats and a cooling regional economy. The International Energy Agency has warned that restoration of capacity and output could take two years. If the Gulf dream goes into retreat, it will impact the quantum of remittances as also the options for those seeking employment.
The cost and the pain are not just seen in spreadsheets. It is a double- or even a triple-whammy! The conflict’s molecular contagion has left thousands of manufacturing units without gas to fuel production—from the ceramic kilns of Morbi to the textile mills of Panipat-Sonipat, many are facing an existential challenge. Elsewhere, enterprises are stranded as migrant labourers head home without LPG for community kitchens. Many restaurants and cloud kitchens have scaled back or shut down.
The energy shock comes in the wake of a troubled job market. Thanks to the impact of generative AI—from coding to enterprise management and advances in deployment of agentic AI—IT service giants, India’s largest employers, exporters and growth multipliers, are redrawing their armadas. They have slowed hiring and hastened firing. This year, many IT service companies and global capacity centres—including Oracle, TCS and Technicolor—are expected to trim headcount further.
The war has triggered what the IEA called the largest oil supply disruption in the history. The spiral of prices is manifest—38 percent in the US, 27 percent in Spain, 30 percent in Canada, and 38 percent in the Philippines. Liquefied natural gas prices are up 60 percent in parts of Asia. Chemical and steel manufacturers in the EU have imposed surcharges of up to 30 percent. Jet fuel has almost doubled in North America. Shipping and logistics companies have implemented fuel surcharges. Effectively, the cost of production is higher, the cost of transportation is spiralling and the cost of insurance is spiking.
This, naturally, casts a shadow on global growth. The IMF warns that the 2025 momentum has halted. The global fuel mix is largely thermal—gas, crude and coal. The IMF warned that in an adverse scenario, global growth could fall below 2.5 percent and inflation rise to 5.4 percent, with an escalation possibly triggering a global recession.
The Hormuz Strait is a critical energy supply route for China, India, Japan and South Korea, which account for a big part of global output. Europe’s growth, fragile before the war, is close to flat-lining. Growth in the US seems robust, but is dependent on billions being poured into the promise of productivity. Ratings agency Fitch warned this week that the US’s debt level is higher than AA-rated nations’ and will touch 120 percent of GDP.
The most dangerous consequence of the war may not be visible in today’s data—the structural damage to the world order. In India, the post-poll piper is yet to arrive for collecting payment. The election cycle is over. The question the political class must address in earnest is how we navigate an era where the familiar has been rendered uncertain and uncertainty is a constant.
Read all columns by Shankkar Aiyar
Shankkar aiyar
Author of The Gated Republic, Aadhaar: A Biometric History of India’s 12 Digit Revolution, and Accidental India
(shankkar.aiyar@gmail.com)