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The economic shock of Israel-Palestine war
October 13, 2023
In positive news for India, the International Monetary Fund (IMF) raised its GDP growth forecast for the country in 2023 from 6.1% to 6.3%. Additionally, there was relief as the Consumer Price Index (CPI) data revealed a decrease in retail inflation to 5.2% in September, down from 6.83% in August and 7.44% in July.
However, a dark cloud looms globally due to ongoing conflicts, especially impacting Israel. Crude oil prices surged by 4% in just four days following recent events. At the annual World Bank and IMF meeting in Morocco, World Bank President Ajay Banga expressed concern, labelling the situation a “humanitarian tragedy” with severe economic consequences. The IMF echoed this sentiment, warning of uncertainties stemming from the conflict.
Pierre-Olivier Gourinchas, IMF’s economic counsellor, noted that the global economy is struggling, foreseeing a slowdown to 2.9% growth in 2024. A 10% increase in oil prices could further dampen global growth by 0.15%, spiking inflation by 0.4%.
India and Israel’s robust trade relationship faces challenges amidst these global tensions. India’s exports to Israel totalled $7.89 billion in FY2022-23, while Israel’s exports to India amounted to $2.13 billion. Key exports include pearls, chemicals, and textiles from India, and machinery and petroleum products from Israel. Indian giants like Tata Sons and Reliance Industries Ltd have investments in Israel. However, financial experts are apprehensive, particularly given India’s position as the world’s third-largest crude oil importer.
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