Economics
Energy Crisis Fans Inflation Fears for RBI, Punishes India Bonds
- Coal shortage ‘is a negative economic shock,’ Nomura says
- Energy crisis may pressure Indian assets, says Emkay’s Arora
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Higher oil prices and coal shortages risk fanning inflation and slowing economic growth in India ahead of a central bank meeting, while punishing the nation’s currency and bonds.
A lack of coal means factories could shut, while forcing India to import more fossil fuels at a time when crude prices at a seven-year high are already weighing on the energy hungry nation. The threat of inflation and worsening external deficit have led to a 14 basis-point surge in the nation’s benchmark bond yields over the past two weeks and a decline in the rupee to its lowest since April.