West Asia Conflict May Pose Short-Term Risks To India’s Economy: RBI MPC Member

New Delhi, Mar 5 (KNN) An external member of the rate-setting panel of the Reserve Bank of India (RBI), Nagesh Kumar, said the ongoing conflict in West Asia may create short-term challenges for the Indian economy but is unlikely to affect its long-term growth momentum.

“Going forward, there is a need for fiscal and monetary policies to work in a coordinated manner to push Gross Domestic Product (GDP) growth to a higher trajectory,” Kumar noted.

He highlighted that higher oil prices, disruptions to exports to the region and potential impacts on remittances are immediate concerns.

In an interview with PTI via e-mail, Kumar said, "The breakout of the Middle East (West Asia) conflict poses some immediate-term challenges for the Indian economy by raising oil prices, disrupting exports destined to the region and the potential loss of remittances, besides threatening security of the Indian diaspora in the region.”

Oil Prices and Trade Risks

Kumar emphasised that the escalation of tensions, including US-Israel strikes, could push global oil prices higher in the near term. However, he expressed hope that the crisis would be resolved soon given the global stakes involved.

He added that diversifying oil sources could help reduce risks. The availability of oil supplies from Venezuela may provide an additional option for India, while a resolution of the crisis and possible easing of sanctions on Iran could also lead to cheaper crude imports.

Inflation Outlook Remains Benign

Despite geopolitical tensions, Kumar said the inflation outlook remains stable. Headline Consumer Price Index (CPI) inflation stood at 1.3 per cent in December 2025 and is projected to average around 2.5 per cent in FY2026 under the new data series.

"The upshot of these trends, namely brightening economic growth outlook amid a continued benign inflationary trend, provides an opportunity for India to stay in the 'goldilocks' zone for longer, except for the challenges posed by the conflicts in the immediate-term," Kumar said.

Push for Higher Growth

Kumar also emphasised the need for coordinated fiscal and monetary policies to lift India’s GDP growth from around 7 per cent to nearly 8 per cent.

Emphasising the need to support the economy’s transition to a higher GDP growth trajectory through coordination of fiscal and monetary policies, he said, “It is this higher growth trajectory, underpinned by a robust manufacturing sector, that will be needed for the creation of adequate and decent job opportunities and durable prosperity.”

(KNN Bureau)