NEW DELHI: Elevated crude oil prices due to geopolitical tensions will keep inflation high in the range of 6% to 6.7% and that too for at least two quarters, as per experts. Recently, crude oil prices hit the $120 per barrel mark while remaining above $110 per barrel for more than two months. Higher crude oil prices and supply chain disruptions amid Russia-Ukraine war have pushed up raw material costs, forcing companies to pass on the burden to the end products.
Though the Government and the Reserve Bank of India came up with a lot of fiscal and monetary measures to keep the retail inflation in check, many commodities still remain under inflationary pressure.
As per Saugata Bhattacharya, executive vice-president and chief economist at Axis Bank, the higher crude oil price is the main reason behind runaway inflation. Crude oil prices are likely to remain on the higher side, despite Wednesday’s OPEC+ decision to raise output in July and August. This is likely to have follow-on effects on petrol and diesel pump prices and other oil and gas products.
“Given the higher input costs, and indications that these will be gradually passed on to end-consumer prices, CPI inflation is likely to remain above 6% for this and the next quarter,” said Bhattacharya. As per SBI’s research report, oil prices could climb further before declining, but it might still hold up for a longer period of time. “At $120/bbl, it still poses significant uncertainties regarding inflation trajectory,” the report said.