Rising Petrol and Diesel Prices May Push Inflation Higher, Says RBI Governor

Reserve Bank of India Governor Sanjay Malhotra has cautioned that the recent increase in petrol and diesel prices may place additional pressure on household budgets and contribute to a rise in consumer inflation in the months ahead.

Speaking after the latest Monetary Policy Committee (MPC) meeting, the RBI chief highlighted that higher fuel costs are expected to have a direct impact on overall price levels across the economy. According to him, retail fuel prices have witnessed a significant increase, with petrol and diesel rates rising sharply over recent weeks.

The central bank estimates that the fuel price revision alone could add around 36 basis points to headline inflation. Beyond the direct effect, higher transportation and logistics costs may also influence the prices of goods and services, further affecting inflation trends.

Governor Malhotra noted that core inflation, which excludes food and fuel prices, remained relatively stable during the first four months of the year. He pointed out that inflation levels excluding precious metals continue to remain moderate, suggesting that rising input costs have not yet been fully reflected in consumer prices.

However, the RBI remains watchful as increasing energy costs and elevated global commodity prices pose risks to both inflation and economic growth. Supply chain disruptions in international markets are also contributing to uncertainty, making it difficult to predict how quickly costs may stabilize.

The governor added that India has managed to ease some supply pressures by sourcing imports from alternative markets. Nevertheless, diversification often comes with higher procurement costs, which could eventually affect domestic prices.

Analysts note that fuel prices have risen substantially since tensions escalated in the Middle East, leading to a sharp increase in global crude oil prices. As a result, petrol prices have crossed the ₹100-per-litre mark in major metropolitan cities across the country.

The government had earlier increased fuel prices in phases to offset the impact of rising international crude oil rates. While the move aimed to reduce financial pressure on oil marketing companies, it has also heightened concerns about inflation and household spending.

With fuel costs continuing to climb, economists will closely monitor upcoming inflation data to assess the full impact on consumers and the broader economy.

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