IMF's Krishna Srinivasan says India should prioritise inflation as crude oil price risks rise

Higher crude oil prices remain one of the biggest risks to Asia's growth outlook, but India's monetary policy should continue to focus on controlling inflation rather than rupee movements, according to Krishna Srinivasan, Director of the Asia and Pacific Department at the International Monetary Fund (IMF).

Srinivasan said the IMF has upgraded growth forecasts for Asia and India, but cautioned that risks remain tilted to the downside as geopolitical tensions keep oil prices elevated. He added that if crude prices remain high and begin feeding into inflation expectations, central banks may have to respond more aggressively.

He added that Asia is particularly vulnerable because the region is highly dependent on imported energy. While countries have diversified energy sources, curbed demand and invested in renewables, sustained high crude prices remain a major concern.

For India, Srinivasan said monetary policy should remain anchored on inflation rather than exchange rate movements. He said that future policy decisions will remain data dependent.

On the rupee, Srinivasan said exchange rate movements should not be viewed as the primary objective of monetary policy. Instead, he argued that the exchange rate should remain the first line of defence against external shocks, while central banks focus on maintaining price stability.

The IMF official also highlighted that India's current account position has been more resilient than expected, with capital flows emerging as the bigger challenge. While outward investment trends remain broadly in line with India's development stage, Srinivasan said the country needs to attract more foreign direct investment (FDI).

[faq type="interview" title="This is an edited transcript of the interview."][ques][/ques][ans][/ans][/faq][faq type="interview"][ques]The IMF last week presented its latest outlook for the global economy, Asia, and India, and all three growth rates have been upgraded. But, it was only October 15, just a few days ago. However, the news since then has been very disturbing on the price front, especially regarding crude. Now it looks like the average of $90 per barrel or $95 per barrel that economists projected for 2026 clearly has to be revised upward to a three-digit figure. Maybe $100 per barrel, according to some people, is here to stay for the next several months. In that case, do you think growth will suffer in Asia and India?[/ques][ans]Let me take a step back. If you look at Asia as a region, this is a highly energy-intensive region. Oil and gas consumption is about 4.5% of gross domestic product (GDP), twice that of the EU. And a lot of this oil is imported. Now, what we've seen in the context of this shock is that countries have adapted in three different ways. One, they have diversified where they get their oil from. Two, they've used measures to curb oil demand. And three, they have moved into things like renewables and so on. So, they have done this and that, in some sense. For example, China lowered its demand for oil. It brought down its inventories. So, did Korea, and so did Japan. So, the question you ask is: Given where we are with the war, what if China comes back into the market? What if other countries do as well? Is there an upside risk to oil prices? The answer is yes. So, what we say is that we have growth in Asia at 4.8% this year and 4.4% next year, but risks are significantly tilted to the downside. One of the risks we highlight is the fact that this oil shock could get worse before it gets better. So, in that sense, yes. However, the way we do our projections is based on our oil price forecasts at that point in time. We don't build projections based on scenarios where conditions worsen, and that's why we identify those as downside risks.[/ans][/faq]

For the full interview, watch the accompanying video



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