Reserve Bank of India Governor Sanjay Malhotra warned that ongoing conflict in West Asia could force India to increase petrol and diesel prices.
The warning comes as global energy markets face significant instability, threatening to spark renewed inflation and disrupt supply chains across the Indian economy.
Speaking during the RBI Monetary Policy Committee meeting in Mumbai on June 5, 2026 [3], Malhotra said the geopolitical impasse in West Asia continues to cloud the global economic outlook. He said that rising energy prices and supply-chain disruptions are weighing on economic activity [1].
Malhotra said that if the current situation persists for a longer period of time, it is only a matter of time before the government must raise fuel prices [2]. He said that retail fuel prices may have needed to increase after May 15, 2026, if the oil crisis persisted [3].
Beyond energy costs, the governor said the conflict is adding volatility to foreign-exchange and bond markets. This instability is driven by soaring crude-oil prices and growing concerns regarding global debt sustainability [1].
Despite these external pressures, the RBI kept the repo rate unchanged at 5.25% [1]. The governor has addressed these concerns both during the domestic policy meetings and at a conference in Switzerland [1].
Malhotra said the continuing impasse creates a challenging environment for monetary policy, as the central bank balances growth with the risk of imported inflation from the energy sector [1].
“"If this continues for a longer period of time, it is only a matter of time before we have to raise fuel prices."”
The RBI's warning signals that India's internal inflation management is increasingly vulnerable to external geopolitical shocks. Because India imports a vast majority of its crude oil, prolonged instability in West Asia directly impacts the fiscal deficit and consumer pricing. By highlighting the potential for fuel hikes while keeping the repo rate steady, the RBI is signaling a cautious approach to growth amidst volatile global financial markets.
