India Warns Geopolitical Tensions, High Oil Prices May Fuel Imported Inflation

India's finance ministry warned on October 1, 2026, that geopolitical tensions, elevated crude oil prices and tighter global financial conditions could increase imported inflation pressures, while a strong El Nino may damage winter crops. In its September Monthly Economic Review, the ministry said India entered the second quarter of fiscal 2026/27 with strong domestic activity, exports, capital inflows and foreign exchange reserves. However, it cautioned that supply disruptions, volatile energy prices and global uncertainty pose near-term risks to inflation, the rupee and capital flows, particularly after the U.S. Federal Reserve's 25-basis-point rate hike in September. Retail inflation rose to 4.82% in August, food inflation stood at 5.95%, and wholesale inflation accelerated to 9.92%. The Reserve Bank of India's open market operations to absorb surplus liquidity could help maintain balanced financial conditions. Foreign-exchange reserves totaled $765.9 billion as of September 18, providing roughly 11.1 months of import cover, though short-term pressure on Indian assets persists amid unsettled U.S. trade relations.