Reserve Bank of India (RBI) Monetary Policy Committee (MPC) member Saugata Bhattacharya has cautioned that inflationary pressures could intensify in the coming months due to a projected rainfall deficit and persistently elevated energy prices, warning that oil prices are unlikely to return to pre-conflict levels anytime soon.

According to the minutes of the RBI’s latest Monetary Policy Committee meeting, Bhattacharya said the ongoing geopolitical tensions involving the United States, Israel, and Iran have fundamentally altered the energy market outlook. He noted that every additional day of disruption increases the risk of broader macroeconomic consequences, making it unlikely that global energy prices will revert to levels seen before the conflict.

The economist also highlighted concerns over India’s monsoon outlook. The India Meteorological Department has projected below-normal rainfall for 2026, largely due to strengthening El Niño conditions. Bhattacharya warned that weaker rainfall could affect agricultural production, leading to higher food prices and adding to inflationary pressures already stemming from global commodity supply disruptions.

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Explaining his decision to support maintaining the repo rate at 5.25 per cent, Bhattacharya said the balance between supporting economic growth and controlling inflation remains uncertain. He argued that policymakers continue to face challenges in assessing whether current economic shocks are temporary or likely to have lasting effects on inflation and growth trajectories.

Bhattacharya also pointed to signs of increasing inflation expectations among consumers and businesses. He cited findings from the RBI’s Inflation Expectations Survey and the IIM Ahmedabad Business Inflation Expectations Survey, both of which indicate rising concerns about future price levels. He further noted that higher wholesale inflation and increasing input costs could eventually be passed on to consumers through higher prices for goods and services.

The MPC member additionally warned about growing global inflationary pressures and the potential impact of international monetary policy decisions on India. With several major central banks either pausing or tightening policy amid global uncertainties, he said India’s capital flows and balance of payments could remain vulnerable to external shocks. Given the complex mix of geopolitical, economic, and climate-related risks, Bhattacharya emphasised that a cautious, risk-management approach to monetary policy remains the most prudent course of action.

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