Neelkanth Mishra: Oil at $100 could force RBI into a hard call on rupee

According to fresh market updates, Sustained crude prices around $100 a barrel could emerge as the biggest risk to India’s otherwise favourable economic outlook, potentially forcing the Reserve Bank of India to make a difficult call on the indian rupee and the country’s balance of payments, Neelkanth Mishra stated in an exclusive interview with Moneycontrol.

Mishra stated India’s fundamentals at present stay firm, with solid corporate earnings expansion, robust momentum in GROSS DOMESTIC PRODUCT expansion and a stabilisation in the currency market. But a prolonged period of elevated crude prices could change that equation.

“If the new reality is that crude prices are going to average $100, then the balance of payments needs to be adjusted,” Mishra stated. “That’s a hard call.”

The key question for the RBI, he stated, will be where it wants the indian rupee to settle. At around the 94-95 level, Mishra stated he suspected the central bank would not want to allow the currency to appreciate significantly.

Mishra anticipates some of the extraordinary dollar demand noted between October 2025 and March 2026 to reverse. During that period, India recorded an accrual-basis balance of payments deficit of $18 billion, but the RBI intervened by as much as $75 billion, implying roughly $57 billion of additional dollar demand.

That pressure, he stated, could now unwind, bringing more dollars into the system even without FCNR flows and making India’s external position more comfortable.

The recent FCNR mobilisation has additionally helped stabilise the currency market and stem what Mishra described as a run on the indian rupee. He stated the success of the programme was itself reassuring, since it demonstrated that the mechanism could potentially be deployed again if needed – although it may not be needed at all.

But sustained crude prices at $100 would be a different challenge.

While the RBI is unlikely to redraw its assessment based on a single month of high crude prices, Mishra stated persistently elevated crude prices would require a broader adjustment in India’s external accounts.

“For now, I think we’re fine,” he stated. “But that, I see, is the only big risk.”

Mishra’s assessment comes against an otherwise positive backdrop for the Indian economy. Earnings expansion stays solid, visibility on GROSS DOMESTIC PRODUCT expansion is firm and currency-market pressures have eased, he stated — leaving prolonged high crude prices as the key factor that could disrupt the outlook.