India Can Absorb Short-Term Oil Price Shocks Without Significant Inflation Impact: CEA

2025-06-21 02:04:27

(MENAFN- KNN India) New Delhi, Jun 21 (KNN) India is likely to weather the recent surge in global oil prices with limited impact on domestic inflation, according to Chief Economic Adviser (CEA) V. Anantha Nageswaran.

Speaking in an interview on Friday, Nageswaran downplayed immediate concerns over the economic fallout from rising crude prices driven by escalating tensions in the Middle East.

“While elevated oil prices are a concern, they are not yet significant enough to trigger serious economic disruption,” Nageswaran said, adding that India's current macroeconomic conditions-characterised by easing inflation, ample liquidity, and stable interest rates-remain supportive of growth.

Over the past month, Brent crude prices have surged by nearly 20 percent amid intensifying hostilities between Israel and Iran.

As the world's third-largest crude importer, India is exposed to oil price volatility, which can stoke inflation, squeeze household budgets, and dampen private consumption-an economic driver that accounts for nearly 60 percent of the nation's GDP.

Despite these risks, the CEA noted that the economy remains resilient.

“It is too soon to get overly concerned,” he said, explaining that only a prolonged price surge-extending over several quarters-would warrant stronger policy interventions.“If crude prices remain elevated only for a short period, the Indian economy should be able to absorb the shock.”

The government forecasts GDP growth in the range of 6.3 percent to 6.8 percent for the fiscal year ending March 2026.

Nageswaran also pointed to the likely positive impact of a favourable monsoon season.

With more than half of India's farmland dependent on rain-fed irrigation, good rainfall is expected to support agricultural output and help maintain food price stability.“Underlying price pressures are quite absent, and ample rainfall will also aid India's economy,” he said.

(KNN Bureau)

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