Rising Oil Prices and Inflation Threaten India's Economic Growth
India's economy has been resilient for most of the past year, but a new report from BNP Paribas warns that rising crude prices and inflation could create fresh headwinds for growth.
The report notes that India is one of the world's largest oil consumers, importing the vast majority of its crude oil. With Brent crude now above $100 per barrel, the increase in oil prices will filter through the economy, affecting transportation and logistics costs, input costs for businesses, and household budgets.
India's retail inflation rose to 4.8 percent in August, the highest level since January 2025, and is no longer being driven by food and fuel alone. Core inflation has also edged higher due to rising metal and commodity prices.
The Reserve Bank of India may have less room to keep monetary policy unchanged if oil prices continue to rise, as it could reverse recent moderation in inflation expectations and complicate the RBI's policy outlook.