Crude Oil Price Surge Sparks Inflation Fears in India
The rising price of crude oil is putting pressure on India's macroeconomic stability. Anindya Banerjee, Head - Commodity and Currency at Kotak Securities, warns that if Brent crude stays above $100 per barrel, inflation could reach 6% by next quarter. This would be a significant increase from the current rate.
Banerjee notes that high oil prices have a ripple effect on the economy, impacting not just households but also OMCs, governments, and corporates. He predicts that India's Current Account Deficit (CAD) could widen to 1.8 to 2.0% of GDP in FY26.
The RBI may respond to this pressure by raising interest rates by up to 50 basis points this fiscal year. Banerjee emphasizes that the central bank will be under pressure to hike rates, with one possible increase expected in October and another potentially following in December or February.