West Asia Tensions Raising Inflation Risks, Says DEA Secretary Anuradha Thakur

The ongoing conflict in West Asia is adding to inflationary pressures and creating fresh challenges for central banks globally, Department of Economic Affairs (DEA) Secretary Anuradha Thakur said on Monday.

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Speaking at the CNBC Awaaz Bharat Economic Samvad event, Thakur said central banks are facing the difficult task of controlling inflation while also supporting economic growth.

“The challenge for central banks is to control inflation, while maintaining the growth momentum,” she said during the discussion.

Her remarks come ahead of the Reserve Bank of India’s monetary policy committee (MPC) meeting scheduled between June 3 and June 5.

According to a Moneycontrol poll of 14 market participants, 10 respondents expect the RBI to keep the repo rate unchanged at 5.25%, while four participants anticipate the beginning of a rate hike cycle from June. The survey also indicated expectations of at least 50 basis points of cumulative rate hikes during FY27 amid inflation concerns linked to supply disruptions from the West Asia conflict.

Inflation And Current Account Risks In Focus

Thakur said global tensions have increased risks related to inflation, supply chains and external balances.
“Rising crude prices, supply chain disruptions, increasing inflation, and tightening financial conditions are all putting pressures on the global economy,” she said at the event.

She added that emerging markets are witnessing higher bond yields and volatile capital flows amid the uncertain global environment.

India imports a significant portion of its crude oil requirements, making the economy vulnerable to sustained increases in global energy prices. According to Thakur, higher crude oil prices directly affect inflation, the current account deficit and government finances.

She also said costs of fertilizers, metals and other raw materials have increased because of the ongoing geopolitical tensions.

The DEA Secretary noted that wholesale price inflation could eventually feed into retail inflation in the coming months.

“We have to be prepared. Our current account deficit needs to be monitored carefully,” she said.
Government Monitoring Economic Conditions

Thakur said the government remains alert to evolving global developments and is closely tracking feedback from investors and businesses.

“We recognize global tensions remain. We get this feedback from investors, global and domestic businesses,” she said, adding that the government would take appropriate measures if required.

Despite the external risks, she said India has entered FY27 with relatively stable macroeconomic conditions compared with earlier global crises.

According to her, domestic demand, capital expenditure activity and the services sector continue to support economic growth.

Thakur also said India’s banking system remains stronger than in previous periods of global instability, while foreign exchange reserves remain close to $700 billion.

India Diversifying Crude Oil Sources

On energy imports, Thakur said India has diversified its crude sourcing strategy over recent years by importing oil from nearly 40 countries.

She added that around 70% of India’s crude imports now come from regions that are relatively less exposed to the current West Asia conflict, helping reduce supply concentration risks.