The Iraq militant crisis has blown up beyond the Middle East to affect the world at large, and even as concerns grow at home about rising oil prices and inflation, Reserve Bank of India governor Raghuram Rajan assured India was prepared to deal with the situation. However, Iraq's largest oil refinery has fallen to militant forces, compounding the crisis, a day after Rajan's assurances.
Rajan had stated on Tuesday that India was in a much better position on the external front compared to last year.
"We have sufficient reserves. The current account deficit is low. So I think one should not worry too much about the external side at this point," Reuters quoted Rajan as saying.
A country's current account deficit reflects the ratio of its imports to exports.
According to PTI, Rajan had said that since the oil resources are in the south of the beleagured nation, the infighting was not taking a direct toll on oil business.
However, the world received fresh news on Wednesday that Sunni militant group Islamic State in Iraq and Levant (ISIL) has now taken control of the biggest oil refinery in Iraq, just 200 kilometres from Baghdad, as reported by The Hindu. India imports more than half a million barrels per day (bpd) of crude oil from Iraq.
Rajan pointed out that the country was monitoring the situation in Iraq which worsened over the last few days.
"The issue in Iraq is still an area of uncertainty. It is an issue that we are watching, and of course all should be concerned with the fighting in Iraq," PTI quoted Rajan.
ISIL has run over much of the Shia state of Iraq, even as the United States is contemplating the use of force to clamp down on terror.
India is already seeing a five-month high inflation with the wholsale price index for May reaching 6.01 percent and food inflation touching 9.50 percent. The Iraq crisis has caused the rupee to fall to 60.55 to a dollar on Tuesday because of rising prices of crude oil.
Apart from the Iraq crisis, the concern about the weak monsoon is also piling on the government, which will announce the Union Budget for 2014-15 early next month.