West Asia fertiliser disruption may raise inflation risks for India despite adequate buffers: CareEdge
New Delhi, June 19
India remains exposed to a prolonged fertiliser supply disruption arising from the West Asia crisis, although its relatively comfortable external buffers could help cushion the impact, according to a CareEdge Global report.
The report, titled "Fertiliser shock: West Asia crisis crunches supply to Asia-Pacific", assesses the vulnerability of 14 Asia-Pacific economies to fertiliser-related disruptions stemming from tensions in West Asia and risks to shipping through the Strait of Hormuz.
CareEdge places India in the category of economies facing "high exposure" to fertiliser shocks, alongside the Philippines, citing the country's dependence on fertiliser imports, reliance on West Asian supplies, large agricultural sector and significant food inflation sensitivity.
According to the report, "High exposure due to sizable fertiliser imports dependence (37.4%), substantial reliance on West Asia fertiliser imports (33.9%), a large agricultural sector (16.6% of GDP) and a relatively high food weight in CPI (36.8%)."
The report notes that disruptions to fertiliser supplies and higher energy-linked production costs could increase agricultural input prices, potentially feeding into food inflation. Given that food accounts for more than one-third of India's consumer price basket, any sustained rise in fertiliser costs could have broader implications for inflation and government finances through higher subsidy requirements.
However, CareEdge believes India is better positioned than some regional peers to absorb short-term shocks. The report said India has "Moderate buffers supported by strong reserve coverage (8.6 months of imports) and a contained current account deficit (-0.9% of GDP)."
In its broader assessment, the report observed that India faces elevated risks from fertiliser-related disruptions but retains some resilience due to its external position. It stated, "Although both India and the Philippines exhibit elevated exposure to fertiliser-related disruptions, their vulnerability is moderated by comfortable reserve buffers and manageable external positions."
Looking ahead, the rating agency said the trajectory of the crisis and developments around the Strait of Hormuz will determine the extent of the impact. Peace agreement and reopening of the key shipping route could limit supply disruptions, though a complete normalisation of supply chains is expected to take time.
The report cautioned that a prolonged disruption could test the resilience of economies such as India by increasing input costs for farmers and adding pressure on food prices, even as existing external buffers help mitigate immediate macroeconomic risks.
Across the Asia-Pacific region, CareEdge identified Bangladesh as the most vulnerable economy to a fertiliser shock, while advanced economies such as China, Japan, South Korea and Singapore were assessed as relatively insulated because of lower agricultural sensitivity and stronger external and fiscal buffers.
— ANI
Reader Comments
Every time there's a crisis somewhere, India gets pulled into it. Strait of Hormuz, West Asia tensions, it's always about our imports. We need to learn from this and invest in our own fertiliser plants. Atmanirbhar Bharat should be real, not just slogans.
The report says we have 'moderate buffers' but 8.6 months of forex reserves is good. The real worry is food inflation - if fertiliser prices go up, subsidy bill will balloon and government will have less money for other things. Hope the peace talks work out. 🙏
Interesting to see India compared alongside the Philippines. Shows how interconnected global supply chains are. Even with strong reserves, prolonged disruption would hurt - especially for small farmers who can't absorb higher costs. Smart policy needed, not just fire-fighting.
Why are we always caught off guard? West Asia tensions have been there for decades. Time for India to diversify fertiliser imports - maybe from Russia or Africa. Also, why can't we promote organic farming more? Chemical fertilisers dependency is risky long-term. 🤔
Good analysis from CareEdge. But I think the government should also focus on reducing food inflation through better supply chains and MSP reforms. Just having forex reserves won't help if poor people can't afford dal and rice. Food security is national security.
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