India's Inflation Shielded from Oil Price Spike, Says FM Sitharaman

The price of crude oil that India imports has been on a declining trajectory for the past one year, till the geopolitical clashes commenced in West Asia on February 28, 2026, the Finance Minister said in an answer to a question in the Lok Sabha.

"Between the end of February and until March 2, 2026, the crude oil price (Indian basket) rose from $69.01 per barrel to $80.16 a barrel. Given that India's inflation is near the lower bound, the impact on inflation is not estimated to be substantial at this point," Sitharaman said.

Global crude prices have been rising since February 28, when the US and Israel launched military strikes on Iran. The war has now spread to the Middle East region as Iran hit back with retaliatory drone and missile strikes on US bases in the region.

Replying to the question, the minister said that the RBI's Monetary Policy Report in October 2025 had estimated that if crude oil prices are higher by 10 per cent than the baseline assumptions, and assuming full pass-through to domestic prices, inflation could turn out to be higher by 30 basis points.

She further stated that the medium-term impact of the global crude oil price rise on inflation depends on several factors, including exchange rate movements, global demand and supply situation, monetary policy transmission, the state of general inflation, and the extent of the indirect pass-through.

The average retail inflation measured by the Consumer Price Index declined from 5.4 per cent in 2023-24 to 4.6 per cent in 2024-25 and further to 1.8 per cent in 2025-26 (April-January).

The headline inflation for January 2026 stood at 2.75 per cent and is near the lower bound of the RBI's inflation tolerance band of 4 per cent to 2 per cent.

As part of inflation management, the Monetary Policy Committee (MPC) has reduced the policy rate by 125 basis points cumulatively since February 2025, Sitharaman said.

The government has also undertaken a series of measures to control inflation and mitigate its impact on the common citizen. These include augmentation of buffer stocks for essential food items, strategic sales of procured grains in the open market, facilitation of imports and export curbs during periods of short supply, she said.

Besides, the government has taken fiscal steps such as exempting annual incomes up to Rs 12 lakh (and Rs 12.75 lakh for salaried individuals from income tax so that the middle class has more money in its hands. Besides, the GST rates have been cut across the board to make goods and services cheaper for consumers, she added.

- IANS