West Asia Tensions and Oil Price Rise Unlikely to Significantly Impact Inflation: Sitharaman

Finance Minister Nirmala Sitharaman on Monday told Parliament that the ongoing geopolitical tensions in West Asia and the rise in global crude oil prices are not expected to significantly impact India’s inflation at present, as inflation remains near the lower bound. In a written statement, she noted that the medium-term effect of rising oil prices would depend on factors such as exchange rate movements, global demand and supply conditions, monetary policy transmission, overall inflation trends, and the extent of indirect pass-through to domestic prices.

The government has taken multiple measures to control inflation and reduce its impact on citizens, Sitharaman said. These include maintaining buffer stocks of essential food items, conducting strategic sales of grains in the open market, facilitating imports when necessary, and imposing export restrictions during periods of domestic shortage. According to official data, the crude oil FOB price for the Indian basket rose from $69.01 per barrel at the end of February to $80.16 per barrel by March 2, though global oil prices had largely been declining over the past year.

Retail inflation under the new 2024 base year series stood at 2.75% in January, while the consumer food price index was recorded at 2.13%. The government has also revised the weight of fuel and light in the Consumer Price Index from 6.84 in the 2012 base year to 5.49, while the weight of food and beverages has been reduced to 36.75% from 45.86% to curb seasonal volatility. Economists say rising crude prices may have a stronger impact on the Wholesale Price Index, with Bank of Baroda chief economist Madan Sabnavis noting that consumer inflation would likely remain stable unless fuel prices are increased domestically.

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