Petrol, Diesel Prices May Rise if West Asia Conflict Persists: RBI Governor

As per The Bloomberg report, Reserve Bank of India Governor Sanjay Malhotra has indicated that India may need to increase retail fuel prices if the ongoing conflict in West Asia persists.  

His comments come after Prime Minister Narendra Modi urged citizens to adopt voluntary austerity measures, such as reducing petrol and diesel consumption and delaying gold purchases, to help preserve foreign exchange reserves. 

Potential Impact on Fuel Prices 

Governor Malhotra highlighted the possibility of rising fuel prices due to the prolonged conflict in West Asia.  

He noted that while excise duties have been reduced and state-run fuel retailers are currently absorbing the increase in crude prices, it may become necessary for the government to pass on some of these price increases to consumers if the situation continues. 

India's inflation rate edged up to 3.48% in April from 3.40% in March, as the government absorbed higher crude costs. However, the ongoing conflict poses risks to the inflation outlook, with rising energy prices potentially impacting the economy further. 

Government's Austerity Measures 

In response to the situation, Prime Minister Modi has called for voluntary austerity measures. These include reducing petrol and diesel use and postponing gold purchases.  

The government has also more than doubled the duty on gold, with further measures to curb demand for imported goods expected. 

Read More: Government Assures Energy Security with 60-Day Crude and 45-Day LPG Reserves as India Initiates Fuel Conservation Mission! 

RBI's Economic Forecast 

The RBI has forecast a growth rate of 6.9% for the current financial year, with inflation averaging 4.6%.  

Despite these projections, economists anticipate a slowdown in growth and a rise in inflation due to the conflict. The RBI has maintained its key policy repurchase rate at 5.25% as of April. 

Conclusion 

The ongoing conflict in West Asia presents significant challenges for India's economy, particularly in terms of fuel prices and inflation. The government's call for voluntary austerity and the RBI's cautious approach highlight the complexities of managing economic stability in such uncertain times. 

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