New Delhi, May 16 -- With no sign of the US-Iran war ending and global oil prices likely to reach record highs within a quarter, Santosh Mehrotra, former Economic Advisor to the United Nations, warned that India's current account deficit could widen by 0.3 per cent of GDP for every USD 10 rise in oil prices. He expected inflation to rise further as government action on fuel and gold comes "too little, too late," while geopolitical risks and supply disruptions keep pressure on the rupee and household budgets.

Mehrotra explained the direct transmission of oil prices to India's economy, "For every USD 10 increase in the international price of oil, it increases our current account deficit by about 0.3 per cent of GDP. And simultaneously, tha...