Rajan Urges India to Boost Oil Reserves Amid Global Shocks

Former RBI Governor Raghuram Rajan has called for India to significantly expand its strategic oil reserves and diversify its trade relationships to build economic resilience against escalating global shocks. Speaking on the heels of disruptions in the Strait of Hormuz, Rajan emphasized that geopolitical tensions and trade disturbances necessitate a robust national strategy. Rajan's commentary underscores a critical vulnerability for India, a major net importer of crude oil. Larger strategic petroleum reserves would provide a buffer against price volatility and supply interruptions, mitigating their inflationary impact and potential drag on economic growth. He also advocated for the diversification of import and export markets, reducing reliance on single regions or trade routes that are susceptible to disruption. Furthermore, Rajan pointed to the rupee's recent depreciation, linking it to insufficient foreign investment inflows. He urged policymakers to adopt a long-term perspective on critical commodity exposure, suggesting a dual approach of enhancing domestic production where feasible and establishing strategic buffers for essential goods. This strategy aims to insulate the Indian economy from external price shocks and ensure stability in key sectors, thereby supporting sustainable economic development and maintaining price stability.