The ongoing conflict in West Asia is beginning to impact India’s economy. RBI Governor Sanjay Malhotra recently warned that rising oil prices could lead to higher petrol and diesel costs. He stated that if the tensions persist, these prices may eventually increase for Indian consumers.
Currently, the government and state-owned oil companies are absorbing the rising crude oil prices. However, this situation cannot continue indefinitely, according to Malhotra.
Government Measures and Public Appeal
During an international conference in Switzerland, Malhotra explained that the government had reduced excise duties. Additionally, public oil companies are taking on the burden to avoid passing the full cost to consumers. However, if the conflict continues, fuel prices may rise, affecting everyday citizens.
Meanwhile, Prime Minister Narendra Modi has urged people to conserve fuel and reduce unnecessary spending. Specifically, he recommended minimizing petrol and diesel consumption and delaying gold purchases to protect the country’s foreign currency reserves. As a result, the government has more than doubled the import duty on gold. Further steps to reduce demand for imported goods are expected in the near future.
Rising Inflation and Supply Chain Disruptions
India’s retail inflation rose to 3.48% in April, up from 3.40% in March. Although this figure is slightly below expectations, experts warn that rising crude oil prices could add more pressure on inflation. The West Asia tensions have already disrupted supply chains, especially affecting oil supply and freight services. This disruption may impact Indian markets in the coming months.
RBI’s Outlook on Economic Growth
The RBI projects India’s growth rate at 6.9% for the current fiscal year, with inflation averaging 4.6%. However, economists believe that prolonged conflict could slow economic growth. Malhotra confirmed that the RBI maintained the repo rate at 5.25% in April. He emphasized that the central bank will make decisions based on economic data at each meeting. If inflation persists, the RBI is prepared to take necessary actions to control it.
