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The impact of increasing tensions at the global level, especially in West Asia (Middle East), is now visible on India’s pockets. Reserve Bank of India (RBI) Governor Sanjay Malhotra has indicated that if the cross-border conflict prolongs, the government may pass on the burden of increased crude oil prices to the general public. This simply means that there may be a huge increase in the retail prices of petrol and diesel in the coming days.

RBI Governor’s warning: “The burden of expenditure will have to be borne”

In a recent program, Governor Sanjay Malhotra clarified that till now the government oil companies were bearing the burden of rising international crude oil prices, so that domestic inflation could be kept under control.

• Mathematics of inflation: India’s retail inflation rate in April stood at 3.48 percent, which was lower than expected. The main reason for this was the stable fuel prices.

• Supply Chain Threat: The governor warned that the Middle East crisis is causing disruptions in the supply chain. If this situation continues, it will be difficult for the government to adjust subsidies and fiscal balance and price increases will become inevitable.

PM Modi’s ‘Save Foreign Exchange’ mission

Prime Minister Narendra Modi has appealed to the countrymen to voluntarily make some sacrifices and choose smart options to safeguard the foreign exchange reserves. Addressing a rally in Hyderabad, he gave several important suggestions:

1. Judicious use of fuel: Use public transport (like metro) to reduce petrol and diesel consumption.

2. Smart Choice: Promoting car pooling, electric vehicles (EV) and adopting ‘work from home’ (WFH) where possible.

3. Postpone buying of gold: The PM has appealed to postpone the purchase of gold for at least a year. It is noteworthy that the government has custom duty has already been more than doubled so as to reduce imports.

4. Foreign travel: To save foreign exchange, it has been suggested to postpone unnecessary foreign trips for some time.

Impact on economy and growth forecast

Reserve Bank for this financial year 6.9 percent Economic growth rate has been estimated. However, economists believe that if fuel prices increase due to global tension, not only will inflation increase, but the pace of economic growth may also slow down. Currently the repo rate is stable at 5.25 percent, but future challenges may make it difficult for the RBI to take policy decisions.