‘Rising crude oil prices a challenge for external sector’

The impact of the surge in crude oil prices following the West Asia war needs to be monitored, even though headline inflation has remained within the tolerance band, as it poses a challenge for the external sector, the Reserve Bank of India’s (RBI's) monthly State of the Economy report said.

- MANOJIT SAHA

The report said India has entered this phase from a position of macroeconomic strength, as domestic demand continues to be the key driver of growth. At the same time, the near-term outlook remains somewhat clouded by supply-side pressures.

It also noted that domestic economic activity in April showed resilience despite a deceleration in some indicators.

“Although headline inflation remains firmly within the tolerance band, the pass through to domestic prices needs to be monitored,” the report, which is authored by RBI staffers, with the guidance of Deputy Governor Poonam Gupta, said. The views of the report are those of the authors and do not represent the RBI’s views.

Brent crude prices, which declined to $100.71 per barrel on Friday, are still up 36.3 per cent from late February, when the conflict began.