Energy Shock Pushed India’s Inflation By About 0.5 pc: IMF
“The energy shock has had an impact globally, and no country has really been untouched by the global shock. We did see that India did face supply disruptions with respect to energy. India was also affected by higher prices, like most countries in the world, because of the energy price shock and, of course, because India imports quite a lot of energy,” said the IMF spokesperson
Chennai: The International Monetary Fund expects around 0.5 per cent rise in headline inflation in India due to the West Asia-induced energy shocks. It can also potentially add to some pressures on India's fiscal deficits. However, US tariff reduction will partly offset the energy shock on India, it finds.
Oil prices are still 30 percent higher than pre-war levels. In many economies, higher oil prices are contributing to a pickup in headline inflation. In India, it is pushing headline inflation by 0.5 per cent, it is much lower in China. Some of the countries with higher energy shocks to inflation include France, Italy, the United States, Germany and Brazil, found the IMF's study.
“The energy shock has had an impact globally, and no country has really been untouched by the global shock. We did see that India did face supply disruptions with respect to energy. India was also affected by higher prices, like most countries in the world, because of the energy price shock and, of course, because India imports quite a lot of energy,” said the IMF spokesperson.
“The effect on the external balance as well as India's -- the price at which India had to import energy increased puts pressure on costs and inflation. And it can also potentially add to some pressures on India's fiscal deficits,” IMF said.
However, inflation was low, the current account deficit was modest, and India has ample foreign exchange reserves. So, that work on the macroeconomic side and those buffers that India built have been a source of resilience for the Indian economy, despite the fact that there is still an impact from the shock.
As per IMF’s estimates, India is projected to grow by 6.5 per cent in fiscal year 2026-2027. It also reflects the reduction in the U.S. tariff rate, which had been set at 50 per cent and then was reduced to 10 per cent. And that reduction in tariffs also partly offset the impact of the global energy shock on India.
