According to Reserve Bank Governor Sanjay Malhotra, if the Middle East situation lasts longer, the government may have to raise the price of fuel and diesel.
Malhotra emphasised that the administration has been relatively fiscally responsible and on the path of fiscal consolidation while speaking at a conference in Switzerland on Tuesday.
Energy costs have increased due to the disruption of oil and gas supply caused by the crisis in the Middle East and the blockade of the Strait of Hormuz.
Malhotra stated that India is heavily reliant on energy and fertiliser imports and that the present problems are starting to affect the country.The governor of the Reserve Bank of India (RBI) stated that it is "matter of time that the government will actually pass on some of these price increases" if the crisis persists for an extended length of time.
Despite the Middle East turmoil that began on February 28, the government has not raised the retail prices of fuel and diesel.
Among other austerity measures, Prime Minister Narendra Modi has urged cutting back on fuel and edible oil usage in order to conserve foreign currencies.
The rupee is currently trading below 95 against the US dollar after experiencing a sharp decline in value.