Fuel Price Surge May Trigger Fresh Inflation Wave

Petrol Diesel Price Hike | The possibility of another fuel price hike is raising concerns for millions of Indian households, with a new report from CRISIL warning that petrol and diesel prices could climb even higher in the coming months. The development is expected to intensify inflationary pressures and increase the cost of living across the country.

According to CRISIL, petrol and diesel prices have already increased by nearly ₹7.5 per litre since May 15. If global crude oil prices continue to remain elevated, the increase could reach as high as ₹10 per litre, significantly impacting transportation, manufacturing and retail sectors.

The report highlights that fuel price hikes have a direct impact on inflation because India’s logistics network heavily depends on road transportation. Nearly 71 percent of the country’s freight movement takes place through trucks and commercial vehicles. As diesel becomes more expensive, transportation costs rise, ultimately pushing up the prices of goods consumed by everyday citizens.

CRISIL estimates that a ₹7.5 per litre increase in fuel prices could raise retail inflation by approximately 0.36 percent. If the hike reaches ₹10 per litre, inflation may increase by nearly 0.48 percent.

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Daily-use essentials are likely to feel the immediate impact. Higher transportation costs may lead to increased prices of milk, fruits, vegetables, pulses, tea, coffee, spices, eggs, meat and fish. These products rely heavily on efficient supply chains and logistics networks, making them particularly vulnerable to fuel-driven cost escalation.

The impact is expected to extend beyond food items. Consumer electronics, clothing, wooden products, cement, ceramics and construction materials may also witness price increases as businesses pass on higher operational costs to consumers.

Industries such as chemicals, coal and metals are also likely to face mounting pressure. Rising production and transportation expenses could force companies to increase product prices or scale back output to manage profitability.

The report further notes that average crude oil prices during the first two months of the current financial year stood at $112 per barrel, substantially higher than the annual assumption of $95 per barrel. This sharp gap is adding fresh pressure on domestic fuel pricing and increasing uncertainty in the market.

CRISIL has also cautioned that weather conditions could further complicate the inflation outlook. A weak monsoon, the impact of El Niño and lower agricultural production may contribute to rising food inflation in the months ahead.

While India’s overall inflation rate currently remains below the Reserve Bank of India’s 4 percent target, analysts believe the situation could change rapidly if fuel prices continue to rise and weather-related challenges affect food production.

A rise in petrol and diesel prices does not affect only vehicle owners. Increased transportation, production and distribution costs eventually influence the pricing of almost every product and service in the economy. As a result, households may face growing pressure on monthly budgets, with inflation once again emerging as a major concern for consumers and policymakers alike.

Key Quotes (Translated):

“Petrol and diesel prices may rise by up to ₹10 per litre if global crude oil prices remain elevated.”

“A ₹7.5 per litre fuel price increase could raise retail inflation by around 0.36 percent.”

“Nearly 71 percent of India’s freight transportation depends on road transport.”