Business News | IMF Flags Energy Price Risks for India, Warns Prolonged Middle East Conflict Could Fuel Inflation
Get latest articles and stories on Business at LatestLY. India could face renewed inflationary pressures if the Middle East conflict keeps energy prices elevated for longer, the International Monetary Fund (IMF) has warned, highlighting the risks to economic resilience from higher fuel costs despite the country's efforts to diversify oil supplies.
New Delhi [India], October 16 (ANI): India could face renewed inflationary pressures if the Middle East conflict keeps energy prices elevated for longer, the International Monetary Fund (IMF) has warned, highlighting the risks to economic resilience from higher fuel costs despite the country's efforts to diversify oil supplies.
In its October 2026 Regional Economic Outlook for Asia and the Pacific, the IMF said India had adapted to disruptions in energy markets by securing oil from alternative sources outside the Middle East. This had helped restore supplies to levels seen before the conflict.
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“For other large Asian economies (including India, Japan, and Korea), the resilience in part reflects adaptation by securing oil from alternative sources outside the Middle East,” the report said, adding that total oil flows to these countries had returned to their pre-conflict rates since June.
However, the report cautioned that the outlook remained vulnerable to a prolonged energy shock, which could sustain higher commodity prices, weigh on growth and increase cost-of-living pressures.
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“A prolonged conflict in the Middle East could sustain high energy prices,” the IMF said, identifying the possibility of persistent energy disruptions as a key downside risk for the Asia-Pacific region.
The report noted that prices of refined petroleum products, particularly diesel and jet fuel, had risen more sharply than crude oil prices following the conflict. Such pressures could affect transportation and production costs, with potential implications for businesses and consumers.
The IMF also warned that higher energy prices could worsen fiscal balances across the region, making it more difficult for governments to support vulnerable households while maintaining fiscal sustainability.
“Fiscal policy should prioritize preserving sustainability while protecting vulnerable households,” the report said, recommending targeted and time-bound measures over broad-based fuel subsidies or price controls.
Beyond energy markets, the IMF identified uncertainty surrounding artificial intelligence investments and tighter global financial conditions as additional risks to regional growth. A correction in AI-related investments or asset valuations could weigh on business investment and private consumption, while higher global sovereign yields could spill over into regional bond markets.
India's growth is projected at 7 per cent in 2026, supported by private consumption and services activity, according to the report. However, the IMF's assessment indicates that sustaining this momentum will depend partly on how effectively economies manage external shocks and preserve macroeconomic stability.
The report called for stronger energy security, investment in digital infrastructure and skills, and policies aimed at maintaining price stability to strengthen resilience against future disruptions.
This keeps the energy shock as the main news peg, uses exact sentences from the report as quotations and brings in the growth projection later only as context. (ANI)
(The above story is verified and authored by ANI staff, ANI is South Asia's leading multimedia news agency with over 100 bureaus in India, South Asia and across the globe. ANI brings the latest news on Politics and Current Affairs in India & around the World, Sports, Health, Fitness, Entertainment, & News. The views appearing in the above post do not reflect the opinions of LatestLY)