Rise in Crude Oil Prices to Push Inflation, Says RBI Discussion Paper

SEATTLE (Oil Monster): According to a recent discussion paper written by the Reserve Bank of India (RBI), headline inflation in the nation could increase by up to 0.20% points for every 10% increase in the price of crude oil globally. The Indian economy is susceptible to oil shocks, according to the research. It called on the government to take immediate policy measures to lessen its reliance on imports of oil.

The report's conclusions confirm worries that shocks to the price of oil could halt India's current deflationary trend. Normalization of policy could be derailed by any abrupt spike in oil prices. It should be mentioned that excise duty modifications help to somewhat offset the nation's retail fuel prices.

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Core inflation may be impacted by higher input and transportation costs brought on by rising petroleum prices. Additionally, the wholesale pricing index (WPI) will rise as a result. According to the report, food and core inflation may be directly impacted by the ongoing rise in oil prices.

According to the paper, a number of variables, such as supply chain interruptions and tariff disputes, may lead to a rise in the volatility of oil prices, which might be detrimental to the Indian economy in the present.

As per the study, increased supply and declining worldwide demand are causing international petroleum prices to soften at the moment. The government of the nation should keep a careful eye on developments in the world oil market and make dynamic policy adjustments.