Crude Spike Unlikely To Substantially Impact Inflation, Says Finance Minister

 New Delhi: With the sudden spike in global crude oil prices due to the ongoing conflict in the Middle East, India does not expect the surge to significantly push up inflation. However, the government is continuously reviewing the impact of rising global crude oil prices on inflation in the country.

Keeping the global crude shocks in view, Union finance minister Nirmala Sitharaman on Monday said that the impact of global crude price rise on inflation is not estimated to be substantial at this point as India’s inflation is near the lower bound. “The price of both global crude oil and the Indian basket has been on a declining trajectory for the past one year, till the geo-political clashes commenced in West Asia on February 28, 2026,” she said in reply to a written question in the Lok Sabha.

However, industry experts said 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 finance minister also said that between the end of February and until March 2, 2026, the crude oil FOB (free on board) price in the Indian basket rose from $69.01/barrel to $80.16/barrel. “Given that India’s inflation is near the lower bound, the impact on inflation is not estimated to be substantial at this point,” she said.

Global crude prices have been rising since February 28 when the US and Israel launched military strikes on Iran who retaliated with attacks on US positions in the region, as well as Israel. “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 said.

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 percent ± 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. Further, the government has also undertaken a series of administrative measures, including fiscal and trade policy to control inflation and mitigate its impact on the common citizen,” she said.