India Sees Limited Inflation Impact Despite Global Crude Price Surge, Says Sitharaman

Union Finance Minister Nirmala Sitharaman said India does not expect inflation to rise substantially from a jump in global crude prices. She said that despite crude oil prices likely remaining relatively higher due to geopolitical escalations in West Asia, domestic price levels will remain near the lower end of the Reserve Bank of India’s tolerance band. The central bank has an inflation target of 4%, with a tolerance band of +/- 2%.

On Monday, benchmark crude prices surged over 30% and hit multi-year highs amid rising concerns over supply chain disruption and oil output shortages. Prices also surged after Iran named Mojtaba Khamenei as the successor. Amid worries over a prolonged war in the region, multiple oil-producing countries slashed their oil output, including Iraq, Iran, and Kuwait.

As per analysts, Saudi Arabia and the United Arab Emirates may also soon join in cutting production, which could lead to tighter supply.

The crude oil market has been extremely volatile since the war escalated on February 28, with the US and Israel attacking Iran. On Tuesday, crude prices reversed sharply following US President Donald Trump’s comments that the war in Iran could end soon and that he had spoken to Russian President Vladimir Putin. The White House is mulling easing sanctions on some countries, including Russia, to curb excess volatility and the surge in crude prices.

According to reports citing government officials, the impact on consumer prices would be limited for the time being. “Given that India's inflation is near the lower bound, the impact on inflation is not estimated to be substantial at this point,” Sitharaman said.

In the October 2025 Monetary Policy Committee meeting, the RBI estimated that a 10% rise in crude prices could lift inflation by 30 basis points, assuming full pass-through to domestic fuel rates, Sitharaman added.

“However, the medium-term impact of the global crude oil price rise on inflation depends on several factors, including exchange rate movements, global demand and supply conditions, monetary policy transmission, the state of general inflation, and the extent of the indirect pass-through,” Sitharaman noted.