The transmission of global inflation to India in the wake of the Israel-Hamas war will be restricted to mainly crude oil followed by urea and metals like tin and lead, according to Madan Sabnavis, Chief Economist, Bank of Baroda.

“Two points are relevant when it comes to evaluating the price situation. The first is the outcome of the Israel war as it has the potential to change the economics of oil.

“The second is how central banks, in particular, the Fed responds to inflation scenarios that are evolving,” he said.

Sabnavis emphasised that fuel remains the main area of concern as Brent has gone up by 20 per cent or so. This will remain vulnerable in the next month, he added.

Other commodity prices

Cash crops like coffee (up 16.3 per cent over March level), tea (5.9 per cent) and rubber (4.5 per cent) have also witnessed an uptick with coffee (robusta) being a pain point. However, the Arabica variety has witnessed disinflation.

In case of cereals, rice (up 30.3 per cent over March level) appears to be a problem while wheat (-14.9 per cent) and maize (-20.8 per cent) have witnessed declines in prices, Sabnavis said.

In the edible oil complex, groundnuts (up 17.1 per cent over the March level) is the only commodity which has witnessed sharp increase in prices.

“India is not an importer here and hence should not be affected. Stable soybean and palm oil will provide comfort for us,” opined the BoB Chief Economist.

He observed that in the group of fertilisers, urea has witnessed 20 per cent plus inflation and will be of concern for India.

Metal prices have been benign in general though tin (up 6.6 per cent) and lead (6.5 per cent) have witnessed an increase. The same holds for silver (up 5.1 per cent) which has industrial uses. Sabnavis noted that tin and silver are not major imports.

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