India may soon feel a stronger impact of the ongoing conflict in West Asia, with rising global crude oil prices likely to affect consumers if disruptions continue, RBI Governor Sanjay Malhotra said. Addressing the 12th high-level conference on the International Monetary System, organised jointly by the International Monetary Fund and the Swiss National Bank, Malhotra said the Indian government has so far absorbed much of the pressure caused by higher international oil prices.
He noted that petrol and diesel prices at the pump have largely remained unchanged despite a sharp rise in crude prices. According to him, the government has also reduced duties and allowed only limited increases in some regulated prices, including gas.
However, the RBI Governor indicated that such measures may not continue for an extended period if the crisis persists. He said the conflict has already lasted for around 75 days and suggested that, over time, some of the increased costs may eventually be passed on to consumers.
Government maintaining fiscal discipline
Malhotra also highlighted the government’s efforts to maintain fiscal discipline. He said the fiscal deficit, which had risen to 9.2 per cent of GDP during the pandemic, has now been reduced to nearly 4.3 per cent as part of the ongoing fiscal consolidation process.
He further underlined India’s strong economic links with the Middle East, a region currently facing heightened geopolitical tensions. He said nearly one-sixth of India’s imports come from the region, while a similar share of exports is sent there.
In addition, around 40 per cent of India’s remittances and fertiliser imports are connected to the region, along with nearly 60 per cent of the country’s gas supplies. Because of this dependence, he said India remains highly exposed to developments in West Asia.
Given the uncertain global environment, Malhotra said monetary policy must remain flexible, quick and responsive to changing domestic and international conditions.
ALSO READ: Govt clears Rs 5,000 crore emergency credit scheme for airlines amid jet fuel price surge
