Page 8 - Policy Economic Report- June'26

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

• Provide the RBI with greater flexibility to manage foreign exchange volatility during
periods of geopolitical uncertainty.

2. Strong petroleum product exports - Petroleum product exports recorded the highest increase
among the major export categories in value terms, rising by 55% from US$ 5.44 billion in May
2025 to US$ 8.42 billion in May 2026, supported by higher international crude oil prices and
increased export realizations. This ensures continued competitiveness of Indian refiners in global
markets.

Impact of Inflation

• Wholesale Price Inflation (WPI) for the Fuel and Power group skyrocketed to 30.33% in May 2026
(up from 24.89% in April). This surge is directly attributed to soaring international prices for crude
petroleum, heavily driven by geopolitical tensions in the Middle East.

• Rising Input Costs: Because oil and gas are foundational inputs, these high prices are pushing up
the Output Producer Price Index (PPI) for mining, quarrying, and manufacturing, indicating that
oil-dependent industries are facing severe cost pressures. The newly introduced Output Producer
Price Index (Output PPI) provides a broader measure of price movements from the producer's
perspective and complements the Wholesale Price Index in assessing inflationary pressures across
the production chain. The provisional Output PPI for All Commodities increased to 109.6 in May
2026 from 108.6 in April.

• The Reserve Bank of India (RBI) cited rising international crude oil prices and "imported inflation"
as primary risks to the economy. To counter the exchange rate pressures and potential inflation
spikes caused by high oil import bills, the RBI maintained a cautious approach, keeping the policy
repo rate steady at 5.25%.

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