RBI Governor Malhotra Flags West Asia Conflict Risks To India’s Trade And Growth

On April 21–22, 2026, RBI Governor Sanjay Malhotra highlighted the economic challenges India faces due to the West Asia conflict. He noted that while India’s fundamentals remain strong, the crisis is affecting multiple channels of the economy, requiring cautious monetary policy.

Impact Channels

Trade: West Asia accounts for one-sixth of India’s exports and one-fifth of imports.

Energy: Half of India’s crude oil and two-fifths of fertiliser imports come from the region.

Remittances: Nearly two-fifths of inward remittances originate from West Asia.

Inflation: Rising energy and commodity prices risk embedding supply shocks into general price levels.

RBI’s Policy Response

The Monetary Policy Committee (MPC) kept the repo rate unchanged at 5.25% in April 2026, maintaining a neutral stance.

Malhotra emphasized a “wait-and-watch” approach, focusing on inflation expectations rather than blunt demand compression.

RBI is relying on flexible inflation targeting (FIT), which has lowered average inflation to 4.7% since 2016.

India’s Mitigation Measures

Diversifying import sources to reduce reliance on West Asia.

Boosting domestic oil and gas production, though some rationing of industrial gas is underway.

Absorbing oil price pressures through government and OMC interventions, while gas price increases are partly passed to consumers.

Key Highlights

•⁠  ⁠West Asia crisis impacts India’s trade, oil imports, fertilisers, and remittances

•⁠  ⁠RBI warns of “second-round effects” embedding inflation if disruptions persist

•⁠  ⁠MPC keeps repo rate at 5.25%, neutral stance adopted

•⁠  ⁠India diversifies imports and boosts domestic oil and gas production

•⁠  ⁠Inflation targeting policy credited with stabilizing expectations and resilience

Sources: Business Today, The Hindu BusinessLine, The Week, ET EnergyWorld, Business Standard