Oil price surge from West Asia clashes not to have substantial impact on India`s inflation: Nirmala Sitharaman
Amidist the ongoing geo-political clashes in West Asia leading to surge in crude oil prices and its impact on India’s inflation, Finance Minister Nirmala Sitharaman has said that the impact is not estimated to be substantial at this point as the country’s inflation is near the lower bound. She said 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.
Between the end of February and until March 2, 2026, the Crude Oil FOB Price (Indian Basket) rose from $69.01/barrel to $80.16/barrel. 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 minister said that 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. However, 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).
She noted that 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. Also, the government has increased the disposable income of individuals by exempting annual incomes up to Rs 12 lakh (and Rs 12.75 lakh for salaried individuals with standard deduction) from income tax and the recent rationalisation of Good and Services Tax (GST) rate
