Strait of Hormuz Crisis a Wake-Up Call for India to Build Oil Reserves: Ex-RBI Governor

Former Reserve Bank of India (RBI) Governor C Rangarajan has called for a major rethink of India’s development strategy, warning that global conflicts and disruptions to international trade could expose the country’s economic vulnerabilities. He stressed the need to build strategic reserves of critical commodities, particularly crude oil, reduce dependence on imported energy and strengthen domestic manufacturing.

Speaking at the 16th convocation of the ICFAI Foundation for Higher Education in Hyderabad on Saturday, Rangarajan said recent developments, including US President Donald Trump’s tariff measures and the US-Iran war that led to the blocking of the Strait of Hormuz, had delivered a major shock to the global economy and international trade.

He said the traditional foundations of global trade, including agreed tariff rules and the free movement of goods through sea routes, had come under pressure. India must prepare for similar disruptions in the future, even if the current conflict is resolved.

Rangarajan said ‘Atmanirbhar Bharat’ and ‘Make in India’ should not translate into indiscriminate import substitution. Instead, domestic industries must improve productivity, remain globally competitive and produce not just for Indian consumers but also for international markets.

He emphasised that India must maintain reserves of essential commodities to deal with sudden emergencies, particularly disruptions in crude oil supplies. Reducing energy imports through alternative sources of energy should also become a priority.

Highlighting the growing importance of technology, he urged India to embrace Artificial Intelligence (AI) and strengthen innovation despite uncertainties over its impact on employment.

Rangarajan also called for structural reforms in factor markets and greater investment in physical and social infrastructure. Pointing to India’s position at 38th in the Global Innovation Index, compared with South Korea at fourth and China at 10th, he said the country had considerable scope to improve its innovation capabilities.

He added that India must adapt its policies to changing global trade conditions without compromising economic efficiency.