RBI Governor Sanjay Malhotra Says Fuel Prices Could Rise If Oil Remains Elevated

Reserve Bank of India (RBI) Governor Sanjay Malhotra has indicated that India may need to raise retail fuel prices if elevated global oil prices persist due to ongoing geopolitical tensions in the Middle East. His remarks come amid concerns that prolonged supply disruptions could intensify inflationary pressures and strain India’s external accounts.

Malhotra made the comments while speaking at a conference hosted by the Swiss National Bank and the International Monetary Fund in Switzerland. He noted that if the current situation continues for an extended period, it would become increasingly difficult for policymakers to shield domestic consumers from global price shocks, suggesting that fuel costs may eventually have to be passed on.

His statement follows recent remarks by Prime Minister Narendra Modi, who urged citizens to adopt voluntary austerity measures, including reducing petrol and diesel consumption and postponing gold purchases, as part of efforts to conserve foreign exchange reserves. The government has also reportedly taken steps such as adjusting duties on gold and exploring measures to curb non-essential imports, according to earlier reports.

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The RBI governor highlighted that India’s inflation has so far remained relatively contained, with consumer price inflation rising modestly to 3.48% in April from 3.40% in March. However, he warned that this stability could be challenged if global energy prices continue to rise, particularly given India’s dependence on imported crude oil. State-run fuel retailers have so far absorbed part of the cost increases, while excise duty adjustments have also helped limit the immediate impact on consumers.

Malhotra also stressed the importance of fiscal and monetary coordination in managing large external shocks. He noted that while India operates under a flexible inflation-targeting framework, such mechanisms may not be sufficient during prolonged supply disruptions. In such scenarios, coordinated policy responses become essential to stabilise both prices and growth expectations.

Looking ahead, the RBI has projected economic growth of 6.9% for the current financial year, with inflation expected to average around 4.6%. However, several economists have warned that sustained geopolitical tensions could dampen growth momentum while simultaneously pushing inflation higher, creating a more challenging macroeconomic environment.

The central bank recently kept its benchmark repo rate unchanged at 5.25% and reiterated a data-dependent approach to future policy decisions. Malhotra said the RBI remains flexible, willing to “look through” temporary shocks, but prepared to act if inflationary pressures become persistent. The next monetary policy review is scheduled for June 5, where the evolving global situation is expected to remain a key focus.

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