India's exports will suffer due to the anticipated rise of 3 to 5 per cent in crude oil prices following the US decision to end waiver that allowed the country to buy Iranian oil without facing sanctions, the Trade Promotion Council of India said.
"Exports sector is bound to be hit as oil is intermediate product in all kinds of production and services," the Trade Promotion Council of India (TPCI) told PTI.
The council observed that there will be an immediate rise of 3 to 5 per cent in crude oil prices owing to the slated sanctions.
"It is estimated that 10% increase in oil price will increase the trade deficit by USD 7 billion, that is trade deficit will widen by 560 bps and lower GDP by 0.2%. This will in turn weigh on the rupee too, which is expected to depreciate further, making the import much costlier," TPCI said.
India Monday said it was adequately prepared to deal with the impact of the US decision to end waiver that allowed it to buy Iranian oil without facing sanctions.
The Trump administration Monday decided not to continue with the exemptions to oil customers of Iran.
In November, the US had granted a six-month waiver to India, China, Greece, Italy, Taiwan, Japan, Turkey and South Korea to continue importing oil from Iran. The temporary waiver ends on May 2.
In May last year, the US had brought back sanctions on Iran after withdrawing from the Iran nuclear deal which was struck in 2015.
The US had told India and other countries to cut oil imports from the Gulf nation to "zero" by November 4 or face sanctions. However, it later granted a six-month waiver from sanctions to eight countries, including India.
India, which is the second biggest purchaser of Iranian oil after China, had agreed to restrict its monthly purchase to 1.25 million tonne or 15 million tonne in a year (300,000 barrels per day), down from 22.6 million tonne (452,000 barrels per day) bought in the 2017-18 financial year.
India, the world's third-biggest oil consumer, meets more than 80% of its oil needs through imports. Iran in 2017-18 was its third-largest supplier after Iraq and Saudi Arabia and meets about 10% of total needs.