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Hello, here is Ganesh Rao, writing in London. This week, I look at how the Israel -Iran conflict was a reminder of the vulnerabilities of India – and opportunities emerging from the crisis.
The Brahmos Missile System of the Indian army takes boom rehearsals before the day parade of the Republic 2025, in Kartavya Path on January 20, 2025 in New Delhi, India.
Raj k raj | Hindustan Times | Getty images
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The great story
India’s economy looked at a ravine in last week.
Geopolitical tensions in the Middle East could have beat the country. Instead, India found a catalyst in the War of Israel to strengthen its defense sector.
The two countries of the Middle East Accepted a ceasefire Wednesday, following an American bombing campaign that US President Donald Trump said Iranian nuclear ambitions erased. Oil prices have abandoned their short -term gains, removing India from the precipice. But the episode has highlighted many vulnerabilities from India.
India no longer buys Iranian oil, but 40% of its total gross imports still pass the narrow navigable path of the Hormuz Strait, one of the The most crucial narrow oil points in the world. Any disturbance would have indicated serious economic benefits for the country.
For each $ 10 increase per barrel of crude prices, the inflation of consumer prices of India could increase up to 35 basic points while economic growth could decrease by 30 base points, according to an analysis of SBI Research.
Madan Sabnavis, chief economist of the Bank of Baroda, a major bank in India, belonging to a government, echoes this estimate, warning that, while a price increase of 10% was manageable, a sustained price above $ 100 per barrel “can have a major impact”.
The conflict also puts New Delhi in a close situation between its investments in Iran – notably the port of Chabahar, which is operated by Indian companies – And his deep and growing defense relationship with Israel.
India is the largest Israeli arms buyer, representing 34% of its defense exports, according to a March 2024 report by the International Peace Research Institute of Stockholm. Israel represents 13% of imports from India.
Recent India “Operation Sindoor“Against Pakistan, launched after a April militant attack in Jammu and cashmerereveals the depth of this dependence on importance of weapons, according to analysts from the investment bank Jefferies. The operation used a mixture of old Russian equipment and new Israeli equipment, including heron surveillance drones, SPYDER and Barak-8 air surface missile systems.
Shortly after Russia has invaded Ukraine, India found that Moscow, historically a supplier of high -level weapons, had become unreliable. The manufacturing capacity of Russian defense was directed towards the own needs of Moscow for the war in Ukraine, causing significant delays for the military modernization program of India.
Worse, analysts point out that Russian equipment, such as T-90 tanks which are a basic food of the Indian army, seemed to have “underperform” in Ukraine.
Swivel in interior defense
India would certainly not have wanted to undergo another delay in the supply of arms, if the Iran-Israeli conflict to lie down.
It created an urgent need for India to rotate. The transition, however, is more likely to take years or even decades, because 90% of the armored vehicles of India and 70% of its combat aircraft were of Russian origin in 2023, according to research from Bernstein.
“I think that the situation will undoubtedly have increased the desire and the conviction that all countries must increase their defense expenses, which has been launched due to the Russian invasion of Ukraine,” said Anna Mulholland, head of research on the actions of emerging markets at Pictet Management. The company’s emerging market fund has India as the second most important allowance.
“The Middle East disorders, although not new, will surely increase the determination and commitment of people to increased defense budgets that have been talked about,” she added.
Opportunity outside the crisis
From this crisis, India has made the opportunity to develop its domestic defense industry.
JPMorgan analysts have identified recent geopolitical conflicts as a “pivotal moment for generalized recognition of Bel” capacities, referring to the state Electronics Bharat. The stock has increased by around 38% so far this year.
“A constant flow of orders, geopolitical risks raised both in India and in the world, and strong prospects for medium -term growth … with healthy [return on equity] Should continue to lead to outperformance, in our opinion, “said Atul Tiwari de Jpmorgan, executive director of the bank, in a note to customers on June 23.
The most tangible sign of this pivot is “Project Kusha” – the local alternative of India to the Russian Air Defense System S -400, in which Bel is a key development partner. “This program should significantly contribute to the company’s long -term order book once the contracts are finalized,” added Tiwari de Jpmorgan.
India is unlikely to be the only customer of these companies. New Delhi also targets defense manufacturing as an export industry. It aims to double exports to almost $ 6 billion a year by 2030, according to Jefferies.
– Michael Bloom of CNBC contributed to the reports.
TOP TV PICKS SUR CNBC
Dhiraj Nim of Anz notes that if the recent increase in world oil prices presents risks for the Roupie, the “trembling” ceasefire between Iran and Israel has helped stabilize the feeling of investors and improve the short-term prospects of money.
Frederic Neumann, chief economist of Asia at HSBC and Tim Seymour, CIO at Seymour Asset Management, see EM as undervalued, with Korea, India, Vietnam standing up.
Need to know
India will produce a technological company of $ 100 billion. It is according to the CEO of Proseus, one of the largest technological investors in the world. Proseus has invested in the The most buzzing technological companies in IndiaLike the Payu payment service and the Meesho electronic commerce company.
Mixed image for the economy of India. The Bank of India reserve noted that factory and service activity in May has remained healthy, but Urban demand has slowly slowed down.
Capital injection for Air India. During the exercise of India 24-25, Tata Sons and Singapore Airlines pumped in 9,588 Indian rupees crore ($ 1.1 million) in the airline. Air India deals with a Tragic air crash on June 12.
– Yeo Boon Ping
What happened on the markets?
THE NIFTY 50 reached its summit in 2025 to 25,549 points. Investors rushed into stocks after having tensions in the Middle East. The index has added more than 2% since last week and has won more than 7% of the year to date.
The yield of the Indian government’s obligations to 10 years of reference has decreased by 3 basic points compared to last week and is now negotiated to 6.27%.
What’s going on next week?
June 30: Industrial production in India in May
July 1: manufacturer of industrial gas Ellenbarrie IPO from industrial gas, construction agency Civil Globe Projects, India Manufacturing PMI in June
July 2: IPO loan supplier for HDB financial services
July 3: India PMI Services in June
