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4w ago

RBI Study Finds 10% Crude Oil Spike Adds 20 Basis Points to Inflation

The July paper highlights India’s sub-4% inflation remains exposed to oil shocks from import dependence, calling for a shift to cleaner energy sources.

Crude oil shock: 10% price spike can push inflation up 20 bps, says RBI research
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Overview

  • RBI researchers Sujata Kundu, Soumasree Tewari, and Indranil Bhattacharyya used data from 2009-10 to 2023-24 to show that a 10% rise in global crude oil prices raises India’s headline inflation by around 20 basis points.
  • India maintained retail inflation below 4% for five consecutive months through June 2025, aided by deflation in food prices and resilient external fundamentals.
  • Over 80% of India’s oil demand is met by imports, exposing domestic prices to volatility from geopolitical tensions and supply-chain disruptions.
  • Government interventions in fuel markets, including pump-price management, excise duty tweaks, and price caps, have contained but not fully offset oil-induced price pressures.
  • The paper calls for accelerating the shift to non-fossil fuel sources to reduce crude import dependence and bolster macroeconomic resilience against future shocks.