Hello, this is Ganesh Rao, from London. This week, I look at how the Israel-Iran conflict reminds India of its vulnerability and the opportunities arising from the crisis.
The Indian Army’s Brahmin missile system will be held in Kartavya Path in New Delhi, India on January 20, 2025 ahead of the Republic Day parade.
Raj K Raj | Times of India | Getty Images
The report comes from CNBC’s “Inside India” newsletter this week, which brings you timely, insightful news and market commentary about emerging powers and the large companies behind their rapid rise. Like what you saw? You can subscribe here.
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Big story
India’s economy has been staring at the ravine for the past week.
Geopolitical tensions in the Middle East could hit the country. Instead, India found catalysts in the Israel-Iran war to strengthen its defense department.
Two Middle Eastern countries Agree to the ceasefire On Wednesday, President Donald Trump said Eliminate Iran’s core ambitions. Oil prices abandoned short-term gains and eliminated India from the cliff. But this episode highlights many of India’s vulnerabilities.
India no longer buys Iranian oil, but 40% of its total crude oil imports are still on the narrow waterways in the hormuz Strait The most critical oil memo in the world. Any disruption means a serious economic impact on the country.
According to an analysis by SBI Research, crude oil prices rose by 35 basis points per barrel per barrel, and consumer price inflation in India could rise by 30 basis points, while economic growth could fall by 30 basis points.
Madan Sabnavis, chief economist at the Bank of Baroda, a majority-owned bank in India, responded to the estimate, warning that continued prices above $100 a barrel “can have a significant impact” despite a 10% increase in prices.
The conflict also puts New Delhi in a narrow position between Iran’s investments, especially the Chabahar Port Operated by Indian companies – and its deep defense relations with Israel.
India is the largest buyer of Israeli weapons, accounting for 34% of its defense imports. March 2024 Report By Stockholm International Peace Institute.
The most recent in India”sindoor action“Oppose Pakistan, April armed attacks in Jamu and KashmirAccording to analysts at investment bank Jefferies, the depth of reliance on weapons imports is revealed. The operation utilizes a mix of old Russian gears and new Israeli-made equipment, including Heron Surveillance Drones, Spyder and Barak-8 ground-facing air missile systems.
Shortly after Russia’s invasion of Ukraine, India discovered that Moscow was the highest arms supplier in history and had become unreliable. Russia’s defense manufacturing capabilities are targeting Moscow’s own demand for the Ukrainian war, which has caused a significant delay in India’s military modernization plan.
To make matters worse, analysts also pointed out that Russian equipment, such as the T-90 tanks that were stapled by the Indian army, appeared to be “underperforming” in Ukraine.
Rotate domestic defense
If the Iran-Israel conflict is to be delayed, India certainly does not want to suffer delays in weapons procurement.
This urgently requires an Indian hub. However, according to Bernstein’s research, this transition is more likely to take years, if not decades, as 90% of India’s armored vehicles and 70% of fighter jets have a Russian origin in 2023.
“I think the situation will increase, that is, all countries have to increase their desire and belief that their defense spending is started due to Russia’s invasion of Ukraine,” said Anna Mulholland, head of emerging market equity research at Pictet Asset Management, whose emerging market fund has made India the second largest allocation.
She added: “The Middle East is not new and will surely increase people’s determination and promise to do those mentioned defense budgets.”
Opportunities for crisis
In this crisis, India has the opportunity to develop its domestic defensive industry.
JPMorgan analysts identify recent geopolitical conflicts as a “critical moment for widespread recognition of BEL capabilities”, referring to state-owned Bharat Electronics. The stock has risen about 38% so far this year.
“Geopolitical risks in India and globally are stable and have strong medium-term growth prospects … with healthy (ROE) that should continue to lead to outperform performance,” said Atul Tiwari, executive director of JPMorgan.
The most tangible sign of this hub is the “Kusha Project”, a native replacement for the Russian S-400 air defense system in which BEL is the main development partner. “Once the contract is completed, the plan is expected to make a significant contribution to the company’s long-term order book,” added Tiwari of JPMorgan.
India is unlikely to be the sole customer of these companies. New Delhi also aims to defence manufacturing as its export industry. According to Jefferies, it aims to export nearly $6 billion a year by 2030.
– Michael Bloom of CNBC contributed the report.
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ANZ’s Dhiraj Nim noted that while the recent rise in global oil prices poses a downside risk to the rupee, a “shaky” ceasefire between Iran and Israel has helped stabilize investor sentiment and improve the currency’s near-term prospects.
HSBC and Tim Seymour chief Asian economist Frederic Neumann looked at Tim Seymour, CIO of Cio Management, that EM was undervalued, and South Korea, India, and Vietnam stood out.
Need to know
India will produce a $100 billion technology company. According to the CEO of Proseus, one of the world’s largest tech investors. Proseus has invested The most buzzing technology company in Indiasuch as payment services and e-commerce company Meesho.
Mixed pictures of Indian economy. The Reserve Bank of India notes that factory and service activities may still be healthy, but Urban demand slows down sharply.
Air India capital injection. During the period 24-25 of India’s fiscal year, Tata Son and Singapore Airlines Summon 958.8 billion rupees ($1.1 million) in airlines. Air India is processing Tragic air crashed on June 12.
– Yeo Boon Ping
What happened in the market?
this Nifty 50 It reached its 2025 high with a score of 25,549. Investors rushed to stocks after eased tensions in the Middle East. The index has increased by more than 2% since last week and has increased by more than 7% so far.
The benchmark 10-year Indian government bond yield rose by 3 basis points compared to last week and is now trading at 6.27%.
What happened next week?
June 30: Indian industrial output in May
July 1: Industrial natural gas manufacturer Ellenbarrie Industrial Gas IPO, Construction Bureau Global Report This Project IPO, India Made in India PMI, June
July 2: Loan provider HDB Financial Services IPO
July 3: Indian Service PMI June
