Oil’s rise complicates global war on inflation
Rising oil prices pose inflation risks for India, with a $10/barrel hike potentially increasing consumer prices by 0.2-1.4%. Asian economies, especially net importers of crude, are sensitive to CPI and could face challenges.
Oil’s on the boil, and ’s finances wouldn’t look that pretty if fuel-stoked infl ation rearers its ugly head. A Morgan Stanley study showed if global crude oil prices rise to $110-120 a barrel in the next 3-4 months due to supply or geopolitical concerns, India’s infl ation fi ght could stretch.A $10 increase per barrel could impact consumer prices by 0.2 to 1.4 percentage points on the consumer price gauge across Asian economies. India is somewhere in the middle of the pack, with the CPI rising up to 0.5 percentage points for each $10 a barrel increase in oil prices. Any rise in infl ation could derail rate easing plans of central banks, including those of the .
Also with many Asian economies being net importers of crude, there will be an impact on the current account defi cit as well. Ten of the 12 economies in the region are net oil importers and would be affected, but the likes of , , the , and India, which have higher CPI sensitivity to oil price increases and run wider oil defi cits, would be more exposed, Morgan Stanley said
