China and India together account for more than one-fifth of global GDP and energy demand. China is the world's second-largest economy, with a GDP of around $19 trillion. India has overtaken Japan in total GDP, becoming the world's fourth-largest economy in 2026; however, both countries' GDP per capita remains far lower than that of advanced economies.
Hence, these two countries are the world's largest and fastest-growing emerging economies. Inadvertently, the US-Israel-Iran war has caused a historic disruption of tectonic proportions with unprecedented ramifications. The war has created a global shortage of oil and gas, triggering a urea crisis and driving oil prices above $100 per barrel.
This resulted in simultaneous currency fluctuations and energy transitions. Difficult global situations require country leaders to make swift decisions to protect their citizens, resources, and economic growth amid a global crisis. China's President Xi Jinping and India's Prime Minister Narendra Modi have skillfully put plans into place to lessen the effects of the ongoing conflict between the United States, Israel, and Iran, especially the interruptions brought on by the blockage of the Strait of Hormuz.
Against the backdrop of record-high fuel prices, heads of state have urged citizens to adopt behavioural changes in their consumption patterns. Indian Prime Minister Narendra Modi has urged people to resume working from home, cut non-essential foreign travel, save fuel, and pause gold purchases for a year to reduce fuel consumption and the import bill.
Beijing, on the other hand, emphasised state planning & maintaining energy price stability through controls and subsidies. The Indian Government, to shield households from energy price increases, cut excise taxes on petrol and diesel and took further measures to keep pump prices relatively stable by simultaneously providing oil companies with fuel subsidies and imposing windfall taxes on exporters.
China's Xi Jinping has used state contracts and subsidies, expanded long-term contracts with suppliers beyond the conflict area, and drawn on significant strategic oil reserves. China and India have taken distinct yet overlapping approaches to reducing the risk of supply chain disruptions. China is working to expand local coal and renewable energy sources to reduce its reliance on seaborne oil amid disruptions, while India is increasing its imports of fertiliser and LPG from non-Middle Eastern sources.
Recently, the Reserve Bank of India (RBI) rightly described India as being in a Goldilocks phase: high growth and low inflation. This balance is now being tested as the ongoing war has driven the Indian currency to a record low. The RBI has intervened in the foreign-exchange market to curb the depreciation of the Indian rupee, while also using its reserves to curb speculation and manage liquidity and interest rates.
China has retained the renminbi within a band using capital flow measures and has kept monetary policies relatively supportive. Fundamentally, while India allows the rupee to move more freely and focuses on inflation and growth, China runs a tightly managed exchange rate, using capital controls and foreign exchange intervention to keep the renminbi within a narrow band.
India has adopted a reactive cushion approach, including subsidies, tax cuts, foreign-exchange defense measures, and patriotic appeals to citizens. However, structural changes to energy supply, demand, and transport are necessary to reduce vulnerability. China has recalibrated its energy security to align with its growth model, doubling down on reserves, supplier diversification, renewables, grids, and EVs to better absorb shocks.
The US-Israel-Iran war and the resulting global crisis or future unexpected geopolitical escalations can be negotiated to cushion people today and systematically reduce exposure tomorrow. Moving forward, other emerging countries can adopt a strategy of short-term cushioning and long-term investment with resilience, rather than firefighting.
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