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Informist, Wednesday, Jul. 23, 2025
--RBI paper: India inflation can rise 20 bps if crude oil prices rise 10%
NEW DELHI – A 10% rise in the global crude oil prices can increase India's headline inflation by around 20 basis points, according to a paper by the Reserve Bank of India staff.
"Although the passthrough to retail prices has remained contained with active government intervention, increasing dependence on crude oil imports may have inflationary consequences in the long run, warranting constant vigilance and careful monitoring of its potential impact," the paper authored by Sujata Kundu, Soumasree Tewari and Indranil Bhattacharyya, said. The article, part of the RBI's monthly bulletin, does not represent the views of the central bank.
While prices have moderated from around $125 per barrel hit in June 2022 in the wake of the Russia-Ukraine war, they remain volatile. In 2025, Brent crude oil prices have remained between $58 per bbl and $83 per bbl.
Oil prices and their inflationary impact are key metric for monetary policy in India. India imports around 85% of its total crude oil demand. In countries such as India, which are net oil importers, rising oil prices can significantly dampen economic growth and stoke inflation pressures, the RBI staff paper said. India's headline CPI inflation fell to a 77-month low of 2.10% in June.
"Government policies would play a pivotal role in containing the impact (of higher crude oil prices on inflation)," the staff paper said. "Specifically, reducing crude oil dependence by promoting alternate non-fossil energy usage and regional free trade agreements and bilateral treaties with major oil exporters could be explored for oil imports at favourable prices." End
US$1 = INR 86.41
Reported by Shubham Rana
Edited by Akul Nishant Akhoury
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