Finance Minister Nirmala Sitharaman on Monday said the recent increase in global crude oil prices is not expected to have a major impact on inflation in India at present, as the country’s inflation rate remains close to the lower end of the target band.
Responding to a written question in the Lok Sabha, Sitharaman noted that international crude oil prices as well as the Indian crude basket had been declining over the past year until geopolitical tensions erupted in West Asia on February 28, 2026.
She stated that between the end of February and March 2, 2026, the Free on Board (FOB) price of the Indian crude basket increased from $69.01 per barrel to $80.16 per barrel. However, given that India’s inflation rate is currently near the lower limit of the tolerance band, the government does not expect the rise in crude prices to exert a substantial inflationary impact at this stage.
The minister was addressing concerns over whether the government had assessed the potential effect of the recent surge in global crude prices on domestic inflation. International oil prices began climbing after February 28, when the United States and Israel carried out military strikes on Iran, prompting retaliatory attacks by Iran on American positions in the region and on Israel.
Citing the Reserve Bank of India’s Monetary Policy Report from October 2025, Sitharaman explained that if crude oil prices were to remain about 10 percent higher than the baseline assumption—and if the increase were fully passed through to domestic fuel prices—it could push inflation up by around 30 basis points.
She added that the longer-term impact of rising global oil prices on inflation would depend on several variables, including exchange rate fluctuations, the global demand-supply balance, the effectiveness of monetary policy transmission, the broader inflation environment, and the degree to which higher oil costs are indirectly passed on to consumers.
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According to government data, average retail inflation, measured by the Consumer Price Index (CPI), declined from 5.4 percent in 2023–24 to 4.6 percent in 2024–25, and further dropped to 1.8 percent during April–January of 2025–26.
Headline inflation for January 2026 stood at 2.75 percent, which is close to the lower bound of the inflation tolerance band set by the RBI at 4 per cent with a margin of ±2 percent. As part of inflation management, the Monetary Policy Committee has cumulatively reduced the policy rate by 125 basis points since February 2025, the minister said.
Sitharaman also highlighted several administrative steps taken by the government to keep inflation under control and shield consumers from price pressures.
These measures include strengthening buffer stocks of essential food items, releasing procured grains into the open market through strategic sales, easing imports and restricting exports during supply shortages, and imposing stock limits to ensure better availability of key commodities.
Other steps include selling select food items at subsidised rates under the Bharat brand, market interventions for perishable agricultural and horticultural produce, reductions in fuel taxes, and expanding scientific storage infrastructure.
Additionally, the government has sought to boost household disposable income by exempting annual earnings up to ₹12 lakh (and ₹12.75 lakh for salaried taxpayers after standard deduction) from income tax, along with the recent rationalisation of Goods and Services Tax (GST) rates.
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