Ukraine war: SBI sees Re at 77.5 by June; CAD at 3.5% if crude boils

Mumbai: House economists at the nation's largest lender SBI have forecast more pain for the rupee if the ongoing Ukraine war lingers, plumbing to a new low of 77.5 to a dollar by June and marginally improving to 77 by end-December.

They also said the current account deficit (CAD) will be at 3.5 per cent if crude oil trades at $130 a barrel, pulling down growth to 7.1 per cent.

If FY23 average oil price rises to $100 a barrel, it will pull down growth to around 7.6 per cent from 8 per cent estimated earlier, inflation will rise to 5 per cent from 4.5 per cent, and the current account gap will jump to $86.6 billion or 2.5 per cent of GDP and can soar to 3.5 per cent if oil prices average at $130 billion. In that case, inflation will trend at 5.7 per cent and GDP growth will come down to 7.1 per cent, Soumya Kanti Ghosh, the group chief economic adviser at State Bank of India, said in a note on Monday.

The rupee is the worst hit emerging market currency since the invasion of Ukraine by Russia and the resultant sweeping economic sanctions against Moscow.

Crude has been on the boil since the invasion -- jumping from $93 to $130 a barrel last week, before moderating to $110 levels. Russia supplies as much as 14 per cent of global crude supplies and 17 per cent of world's natural gas.

The near-term outlook for the rupee remains challenging until geopolitical tensions moderate.