India’s economic outlook faces increasing pressure as higher crude oil prices and rising inflation weigh on consumption, rural activity and industrial momentum, BNP Paribas said in a research report on September 28.

The brokerage said rising oil prices and commodity inflation would remain a “material challenge” in the near term, while higher global interest rates could put additional pressure on domestic monetary policy. It noted Brent crude had risen above $100 a barrel and said the Reserve Bank of India now has less room to keep interest rates unchanged.

Inflation rose to 4.8 percent year-on-year in August, the highest since January 2025, and stayed above 4 percent for the third straight month. The increase has broadened beyond food and fuel, with core inflation rising partly on higher metal prices.

Several high-frequency indicators are weakening. Manufacturing PMI fell to its lowest since August 2021, while growth in new orders and steel production declined. The RBI’s second-quarter growth projection stands at 4.7 percent, in line with the Bloomberg consensus.