Hello, this is Ganesh Rao, writing from London. This week I look at how the Israeli-Iran conflict was a reminder of the gaps in India-and the possibilities emerging from the crisis.
The Brahmos Rocket System of the Indian army is involved in the full sample before the parade of the Republic of 2025, at Kartvya Path on January 20, 2025 in New Delhi, India.
Paradise Hindustan Times Getty images
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Great story
Over the past week, India's economy has stared at the gorge.
Geopolitical tensions in the Middle East could force the country. Instead, India found in the Israel-Iran war catalyst for strengthening their defense sector.
Two Middle East countries He agreed to suspend the weapon On Wednesday, after a bomb campaign in the USA, which said US President Donald Trump Iranian nuclear ambitions. Oil prices gave up short -term profits, removing India from the abyss. But the episode emphasized many gaps in India.
India no longer buy Iranian oil, but 40% of the total raw imports still move the narrow waterway of the Hormuz Strait, one of The most important oil chokes in the world. All disturbances would mean a serious economic fall for the country.
According to an analysis carried out by SBI Research according to the analysis of SBI research, according to the analysis of SBI research in India for any oil price increase in the amount of $ 10 per barrel, inflation of consumer prices may increase by up to 35 base points, while economic growth may drop by 30 base points.
Madan Sabnavis, the chief economist at Bank Baroda, the majority government bank in India, repeated this respect, warning that although a 10% increase in price was possible to manage, maintained a price above 100 USD per barrel can have a great impact. “
The conflict also places New Delhi in a difficult situation between investments in Iran – especially the Chabahar port, which is supported by Indian companies – and his deep and growing defensive relations with Israel.
India is the largest buyer of Israeli weapons, which is 34% of defense imports, in accordance with Report from March 2024 by the International Institute of Peace Research in Stockholm.
Recent India “Sindoor operation“Against Pakistan, fired after Attack of the April fighter in Dżammu and KashmirIt reveals the depth of this dependence on the import of weapons, according to analysts from Investment Bank Jefferies. The operation used a mixture of old Russian equipment and new Israeli equipment, including hat folding drones, Spyder and Barak-8 rocket systems.
Shortly after Russia attacked Ukraine, India discovered that Moscow, a historically supplier of the highest weapon, became unbelievable. Russian defense production capacity was directed at Moscow's own needs to the war in Ukraine, causing significant delays for the Indian military modernization program.
Even worse, analysts indicate that Russian equipment, such as T-90S tanks, which are the basis of the Indian army, seemed to “leave” in Ukraine.
Turning to national defense
India would certainly not like to bear another delay in ordering orders for weapons or the Iran-Israel conflict could drag.
This created an urgent need to trade India. The transition, however, is more likely that years lasts, if not decades, because 90% of Indian armored vehicles and 70% of combat aircraft had Russian origin from 2023, according to Bernstein's research.
“I think that the situation will undoubtedly increase the desire and belief that all countries must increase their defense expenses, which have been initiated because of the Russian invasion of Ukraine,” said Anna Mulholland, head of market research on the market square on the market at the Market Square at Pictt Asset Management. Emerging Market Fund has India as the second largest allocation.
“Confusion in the Middle East, although not new, will certainly increase people's determination and commitment to increased defensive budgets, which are talked about,” she added.
Crisis
In this crisis, India created the opportunity to develop the national defense industry.
Analysts from JPMorgan identified recent geopolitical conflicts as “a key moment for the widespread recognition of the possibilities of Bel”, referring to state Bharat electronics. This year, the shares increased by about 38%.
“A constant stream of orders, increased geopolitical risk in both India and around the world, and strong growth prospects with an average period … with a healthy (return capital) should still lead to achieving better results,” said Atul Tiwari from JPmorgan, executive director at the bank, in a note for customers.
The most tangible sign of this turn is “Project Kusha”-the domestic alternative of India for the Russian air defense system S-400, in which Bel is a key development partner. “It is expected that this program will significantly contribute to the company's long -term book book after completing the contracts,” added Tiwari from JPMorgan.
India is unlikely to be a lonely customer for these companies. New Delhi is also focused on defense production as an export industry. According to Jefferies, it aims to double exports to almost $ 6 billion a year by 2030.
– Michael Bloom from CNBC contributed to reporting.
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Dhiiraj from Anz notes that although the recent increase in global oil prices is a risk for rupees, the “shaky” suspension of weapons between Iran and Israel helped stabilize the mood of investors and improve short -term currency perspectives.
Frederic Neumann, Asia Chief Economist at HSBC and Tim Seymour, CIO in Seymour Asset Management, see as underestimated, with Korea, India, Vietnam distinguished.
I need to know
India will produce a technology company worth $ 100 billion. According to the director of Proseus, one of the largest technological investors in the world. Proseus invested in The buzz of technology companies in Indiasuch as the PayU payment service and E-commerce Meesho.
Mixed image of India's economy. The India's reserve bank noted that the factory and services in May remained healthy, but Urban demand has rapidly slowed down.
Capital injection for Air India. In the budget year in India 24-25, Dad Sons and Singapore Airlines Pumped in 9588 Crore Indian rupees ($ 1.1 million) in the airline. Air India is dealing with A tragic air disaster on June 12.
– Yeo Boon Ping
What happened in the markets?
. Nifty 50 Hit the height of 2025 to 25,549 points. Investors rushed to shares after alleviating the tensions in the Middle East. The index added over 2% from last week and gained over 7% a year.
The 10-year profitability of Indian government bonds increased by 3 base points compared to last week, and now trads at 6.27%.
What is happening next week?
June 30: India industrial production in May
July 1: Producer of industrial gases Ellenbarrie Industrial Gases IPO, Budowlana Agencja Globe Civil Projects IPO, India Production PMI in June
July 2: IPO providing HDB HDB financial services
July 3: India PMI services in June