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West Asia conflict, US tariffs hit business confidence: RBI
The West Asia conflict is disrupting supply chains of oil and other key commodities and weighing on business confidence, RBI officials said in the August edition of the RBI Bulletin released on…
The West Asia conflict is disrupting supply chains of oil and other key commodities and weighing on business confidence, RBI officials said in the August edition of the RBI Bulletin released on August 25. New US tariffs have added to uncertainty in international trade, though the global economy is still expanding with inflationary pressures, they added.
The Indian economy continues to show strength due to robust macroeconomic fundamentals, the officials stated. Domestic demand remains buoyant, reflected in vehicle and tractor sales, while petroleum product consumption returned to growth after three months of contraction. Merchandise exports hit a four-month high in July 2026, though the trade deficit widened.
Headline CPI inflation rose marginally to 4.45% in July from 4.38% in June, driven by food and beverages, while core inflation stayed stable. The price of the Indian crude basket rose to $89.7 per barrel in August. Kharif sowing has picked up with monsoon activity in July, nearing last year's level.
Indian Opinion Analysis
The RBI's internal assessment signals that external headwinds are now registering on the ground. The West Asia conflict has not caused a supply shock like 2022, but its persistence is eroding business sentiment, which the RBI rarely flags explicitly. The stable core inflation reading gives the Monetary Policy Committee room to hold rates if needed, but rising crude and food prices will keep the inflation target under pressure. The August food price data, already showing broad increases, will be critical for the October policy decision.
Source: thehindu.com
This brief was synthesised by AI from the source linked above.
