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Oil Price and Inflation in India: Exploring Asymmetric Relationship with the NARDL Approach

Suresh G. et al.

FIIB Business Review2026https://doi.org/10.1177/23197145261421703article
AJG 1ABDC B
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0.50

Abstract

Understanding the dynamics of oil price volatility is a growing concern for oil-importing economies like India. Literature has examined the relationship between oil price shocks and economic growth with linear and symmetric assumptions. These assumptions mask the real effects on economic indicators with structural rigidity. This study examines whether oil price shocks cause asymmetric effects on inflation in India, and if so, how these effects differ in the short and long run. The study employed the non-linear autoregressive distributed lag model using monthly data from April 1997 to March 2025 of Brent Crude oil and the Wholesale Price Index of India. The results confirm long-run asymmetry, and positive oil price changes have a stronger and persistent effect on inflation. There is no significant short-run asymmetry observed. The error correction term indicates that 42% of long-run disequilibrium is adjusted within a month. Diagnostics and robustness tests confirmed model stability and prediction accuracy, and the result is not influenced by any structural break shocks. The results emphasize the need for an inflation-forecasting model to integrate the asymmetric transmission and to adjust its trading strategies and the fiscal policy.

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https://doi.org/https://doi.org/10.1177/23197145261421703

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@article{suresh2026,
  title        = {{Oil Price and Inflation in India: Exploring Asymmetric Relationship with the NARDL Approach}},
  author       = {Suresh G. et al.},
  journal      = {FIIB Business Review},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1177/23197145261421703},
}

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