Oil Shock Risks Becoming ‘Nightmare’ for Indian Central Bank
- RBI may have to reassess inflation trajectory as crude jumps
- Rupee falls to record low as oil briefly touches $139 a barrel
A motorcyclist rides out of a Bharat Petroleum gas station in Bengaluru, India.
Photographer: Dhiraj Singh/BloombergThis article is for subscribers only.
The impact of the war in Ukraine on global supply chains could force India’s central bank to raise its inflation forecast, but may leave little scope for it to tighten monetary policy amid a deteriorating global growth outlook, according to economists.
The surge in edible and crude oil prices are bound to feed into headline inflation, which has already breached the upper tolerance limit of the Reserve Bank of India’s 2%-6% target range. While the RBI has blamed supply side shocks for the spike, higher prices will nevertheless eat into disposable incomes of consumers, the backbone of the economy that has yet to fully start spending after the pandemic.