Fuel Price Hike Raises Concerns Over Foreign Investment in India
'Further fuel price hikes may intensify FPI selling iin Indian markets'
Business Standard
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India's recent petrol and diesel price increase of ₹3 per litre may not suffice to address the losses faced by oil marketing companies, leading to heightened inflation concerns and potential foreign portfolio investor (FPI) withdrawals. With FPIs already pulling out ₹2.2 trillion from Indian equities in 2026, sustained fuel inflation could further deter foreign investment until macroeconomic stability is restored.
- 01Oil marketing companies are incurring losses of nearly ₹1,000 crore per day due to rising crude prices.
- 02Foreign portfolio investors have withdrawn approximately ₹2.2 trillion from Indian equities in 2026, reflecting a cautious investment climate.
- 03India's headline Consumer Price Index (CPI) inflation rose to 3.48% in April, the highest in nearly a year.
- 04The Reserve Bank of India has revised its FY27 inflation forecast upward to 4.6% and lowered GDP growth projections to 6.9%.
- 05Higher fuel prices are expected to increase costs across various sectors, including FMCG, cement, and automobiles.
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India's recent decision to increase petrol and diesel prices by ₹3 per litre is seen as a necessary but insufficient measure to address the substantial losses faced by oil marketing companies (OMCs), which are currently losing nearly ₹1,000 crore per day. This price hike raises concerns about inflation and its impact on foreign portfolio investors (FPIs), who have already withdrawn around ₹2.2 trillion from Indian equities in 2026 due to elevated valuations and macroeconomic uncertainties. The rise in fuel prices is expected to exacerbate inflation, as evidenced by India's headline Consumer Price Index (CPI) inflation reaching 3.48% in April, the highest in nearly a year. The Reserve Bank of India (RBI) has responded by revising its FY27 inflation forecast upward to 4.6% and lowering GDP growth projections to 6.9%. As fuel prices affect transportation and logistics costs, various sectors, including fast-moving consumer goods (FMCG), cement, and automobiles, may experience upward pressure on core inflation, complicating the RBI's monetary policy outlook.
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The fuel price hike is expected to increase transportation and logistics costs, which could lead to higher prices for essential goods and services.
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