New Delhi, July 24
While active government intervention has contained spillover to domestic oil prices, policymakers need to be vigilant and cautious of the direct and indirect impact of the evolving global crude price dynamics through continuous assessment, given India’s increasing dependence on crude oil imports, the Reserve Bank of India (RBI) has stressed.
In this regard, government policies would play a pivotal role in containing the impact, said the RBI in a paper titled ‘Revisiting the Oil Price and Inflation Nexus in India’ in its latest Bulletin.
“Specifically, reducing crude oil dependence by promoting alternate non-fossil energy usage and regional free trade agreements and bilateral treaties with major oil exporters could be explored for oil imports at favourable prices,” the paper emphasised.
In recent years, India’s net import demand for crude oil has remained strong, fuelled by consumption growth and robust economic activity.
Oil prices and their inflationary impact is a key metric that sensitise monetary policy formulation in economies vulnerable to oil price shocks, particularly net oil importers, where rising oil prices can significantly dampen economic growth and stoke inflation pressures.