New Delhi, May 28 -- India is facing a perfect storm in the wake of the Iran war. Israel continues hostilities in Lebanon to block a US-Iran deal. Over 40% of our oil imports are still blocked at Hormuz, as are critical imports of LPG, LNG, fertilizers and other items.

Capital has been in flight. The exchange rate is plunging, as are foreign exchange reserves. Growth is slowing, inflation is rising and El Niño may soon hit us. However, there is no need to panic.

A calm but urgent reversal of some policy distortions should help us navigate our way through the crisis, buying us time for further structural reforms to revive high growth over the medium to long term.

The most visible impact of the storm is on the exchange rate. It was ...