No inflation risk from latest spike in oil prices: Economists
oil prices may have a marginal impact on India's FY24 wholesale and retail inflation, said economists. However, they said crude sustaining above the $90-level could be a downside risk for core inflation as companies begin passing on high input costs.
«Unless retail fuel prices change, there is no direct impact of higher oil prices on Consumer Price Index.
However, there will be some marginal impact in the form of higher input costs,» said Aditi Nayar, chief economist, Icra.
Other economists also agreed.
«We don't see a risk to inflation from rising crude oil prices as domestic petrol and diesel prices have not increased since May 2022. There could be marginal upward pressure on core inflation if companies pass on higher input cost pressures to consumers,» said Gaura Sengupta, economist, IDFC First Bank.
Sengupta expects WPI to stay subdued at 0.3% in FY24 but said company profits may suffer due to higher input cost pressures.
«The indirect spillover via input costs could be felt if the oil price rise sustains,» said Dipti Deshpande, principal economist, Crisil Ltd.
«Rising oil prices can constrain further downside to non-food inflation,» said Deshpande.
The Reserve Bank of India, in its State of the Economy report, noted that stabilising core inflation was a sign of broad-based easing of prices.
But higher oil prices for longer periods could disturb inflation calculations.
Ind-Ra, which revised its Indian oil basket cost to $94.5 per barrel, expects wholesale inflation to be nearly a percentage point higher for the second half of the year compared with its earlier forecasts.
