Summary

• India’s fuel subsidies are cushioning inflation for now, and diversified energy sourcing has eased supply pressures.
• But the strain has shifted to the rupee. Its recent slide reflects deeper structural weaknesses, especially chronically soft capital inflows.
• Unless those inflows recover, the rupee’s vulnerability is likely to persist.

By Deepali Bhargava, Regional Head of Research, Asia-Pacific

Oil shock resilience meets rupee strain

India’s response to the latest oil shock raises three core questions: how well policymakers can shield growth and inflation, what’s driving the

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