India's reliance on imported energy exposes it to geopolitical supply shocks. In this context, what is the most likely short-term impact of a major disruption in crude oil imports ?

India imports approximately 85% of its crude oil requirements, making the economy highly vulnerable to global supply shocks. A major disruption typically leads to a sharp spike in crude oil prices. This triggers cost-push inflation, as petroleum products are critical inputs for transportation, logistics, and various manufacturing processes. Consequently, the prices of essential commodities and industrial goods rise, leading to higher input costs and overall inflationary pressure.

Regarding other options: a supply shock would increase inflation (not decrease it) and lead to the depreciation of the Rupee (weakening) due to a widening Current Account Deficit (CAD) as more foreign exchange is required to pay for expensive oil. Furthermore, higher energy costs generally make domestic production more expensive, potentially hurting export competitiveness rather than increasing exports.