'Prepare For The Worst': Uday Kotak Warns Oil Shock Yet To Hit India

Billionaire banker Uday Kotak on Tuesday warned that India must prepare for severe economic stress as the full impact of the ongoing oil price surge triggered by the West Asia conflict has not yet reached consumers.

Speaking at the Confederation of Indian Industry Annual Business Summit in New Delhi, Kotak said India should avoid complacency and prepare for a prolonged period of global uncertainty, energy shocks and economic disruption.

"We must prepare for the worst. It is about preparation, being ready for tough times, rather than waiting for the shock to hit us," Kotak said.

The founder of Kotak Mahindra Bank said the economic effects of the West Asia war are still building and warned that the pressure from rising crude oil prices would eventually hit households and businesses in a much larger way.

"We have not seen the impact in the last two months of the Middle East war in terms of energy price transmission," he said. "It's coming, and it's coming big."

'Prepare For Paranoia

Kotak said India's heavy dependence on imported crude oil leaves the economy highly vulnerable to global disruptions.

India imports more than 85% of its oil requirements, making rising energy prices a major risk for inflation, the rupee and broader macroeconomic stability.

"My view is we should prepare for paranoia before the event," Kotak said, adding that people and businesses must think beyond short-term comfort.

"The shock is coming. I don't think you're very far away from the shock unless the Iran war stops tomorrow morning," he said.

Kotak added that oil marketing companies have so far acted as "shock absorbers," preventing the immediate transmission of higher global crude prices to consumers. However, he warned that the impact cannot be delayed indefinitely.

Fuel Costs May Soon Hit Households

According to Kotak, many households have not yet experienced the true impact of rising oil prices because existing inventories and government interventions are cushioning the effect temporarily.

However, he warned that rising fuel prices would eventually push up transportation costs and prices of daily essentials across the economy.

"Think about a consumer with limited income, having to spend more directly on fuel and indirectly on other items dependent on fuel. The shock is coming," he said.

The remarks come amid growing concerns over the fragile US-Iran ceasefire, disruptions in the Strait of Hormuz and rising global crude prices.

Crude oil prices have surged sharply in recent weeks as markets fear supply disruptions through one of the world’s most critical energy shipping routes.

Long-term Thinking Needed

Kotak also criticised the increasing focus of businesses on short-term performance and stock market movements.

"The ability to take a three-to-five-year view is significantly required, and is missing," he said, urging companies to focus more on long-term resilience and national economic strength rather than quarterly targets.

He said the changing global order is moving towards a more fragmented and "tribal" world, where countries will increasingly prioritise national interests and economic security.

Govt Pushes Austerity Measures

Kotak's remarks come days after Prime Minister Narendra Modi appealed to citizens to reduce fuel consumption, postpone gold purchases and adopt work-from-home practices to help ease pressure on the economy.

The Prime Minister also urged citizens to reduce unnecessary foreign exchange spending and support domestic economic resilience amid the ongoing geopolitical crisis.

Meanwhile, the government has attempted to reassure the public over India's energy preparedness.

Following the fifth meeting of the Informal Group of Ministers (IGoM) chaired by Defence Minister Rajnath Singh, the government said India currently maintains crude oil and natural gas reserves sufficient for around 60 days of demand, while LPG supplies cover approximately 45 days.

India's foreign exchange reserves currently stand at around $703 billion.

Union Petroleum Minister Hardeep Singh Puri said oil marketing companies are currently absorbing losses of nearly ₹1,000 crore per day to keep retail fuel prices stable despite crude prices rising from around $65 to nearly $115 per barrel.

He added that under-recoveries for the current quarter could reach ₹1.98 lakh crore, even as India continues to maintain uninterrupted fuel supplies despite global disruptions.