Former NCAER Economist Says Crude Oil Above USD 100 May Force RBI to Rethink Rate Stance as Persistent Inflation and Elevated Prices Pose Challenges

Crude oil prices remaining above USD 100 per barrel for several days could prompt the Reserve Bank of India to take a closer look at its policy stance, as persistent inflation and elevated oil prices pose challenges for the Indian economy, said Sunil Sinha, Former Senior Economist at NCAER and Former Principal Economist and Director, Public Finance at India Ratings and Research. In an exclusive conversation with ANI on September 16, Sinha said the current economic situation was not favourable and the RBI would have to closely assess the underlying inflationary pressures in the economy before taking a decision on interest rates. He said if the recent rise in both consumer price inflation and wholesale price inflation turns out to be temporary, the RBI may not immediately raise interest rates. However, if the RBI becomes convinced that the current inflationary and oil price pressures will persist for some time, there is a possibility that the central bank could change its stance and go for a reversal. Sinha noted that India's economic growth still has some underlying momentum, which has supported stronger-than-expected GDP numbers. However, high inflation could affect growth in the coming quarters. The Reserve Bank of India kept its key repo rate unchanged at 5.25 percent during its February 2026 meeting after cutting it by 25 basis points at the December 2025 meeting. That decision came after the Union Budget boosted government spending and US-India trade deals raised expectations of stronger economic growth. The RBI raised its GDP growth forecast for FY2025-26 to 7.4 percent, up from its earlier estimate of 7.3 percent, while inflation for FY2025-26 is projected at 2.1 percent. India's annual inflation had accelerated to 1.33 percent in December 2025, below the lower bound of the RBI's mandated 2 to 6 percent tolerance band. The central bank had already cut rates in 2025, bringing the repo rate down from 6.5 percent to 5.25 percent by December. Sinha cautioned that