The war between America and Iran shook the economies around the world. This has had a direct and rapid impact on the prices of crude oil, which are skyrocketing. Expensive oil weakened the Indian rupee. Amidst all this, the Indian government has appealed to the people to avoid buying gold, save fuel and postpone foreign trips. Now the biggest question is, what impact will this entire incident have on your everyday life and what will happen to your EMI in the coming days? To know the answers to all these questions, ABP News spoke to financial expert and chartered accountant Vikas Kumar Tiwari. Come, let us understand the complete account in his own words…

Question 1: How much impact will the rising prices of petrol and diesel have on the common man’s pocket?

Expert opinion: Its impact is very deep and will spread everywhere. The increase in the prices of petrol and diesel decided by the government will not be limited to the fuel of your vehicle only. In fact, petrol and diesel becoming expensive means that transportation of everything that reaches you by road will become expensive – be it vegetables, milk or any grocery item.

For a common man, even a minor increase in fuel prices can mess up his entire month’s budget. Those who go to office in their private vehicles, their commuting expenses will directly increase. At the same time, fares for public transport like auto or bus are also almost certain to increase. The worst impact of this increased cost will be on middle class and poor families, because a large part of their income is already spent on food and transportation. Now they will have less money left for savings or other things.

However, how long this effect will last will depend on two things:

• For how long do crude oil prices remain stable in the international market?
• Does the government try to reduce this burden by taking steps like tax relief or subsidy?

At present, this increase will reduce your spending power and weaken the demand in the market.

Question 2: What impact will the increase in retail inflation have on people’s spending and the overall market?

Expert opinion: When the prices of things increase, it does not just mean that you have to pay more money to the shopkeeper. This is a big sign that the cost of living is continuously increasing throughout the economy. Wholesale inflation, which reflects the cost of raw materials and production, sooner or later turns into retail inflation. The result is that people’s purchasing power reduces and they are forced to change their spending habits.

If seen at the domestic level, rising inflation means that we will have to spend more on food, electricity, hospital expenses and everyday items. As essential items become more expensive, people will start spending less on non-essential items like entertainment, eating out or buying a new car. This has a direct impact on the demand in the market and sales may decrease in many sectors.

From the market perspective, this persistently high inflation creates an environment of uncertainty for businessmen and investors. Companies whose work is more dependent on fuel, transport and imported raw materials, their profits reduce due to increase in their costs. Apart from this, if inflation remains high for a long time, then there is an expectation that the Reserve Bank of India (RBI) may increase interest rates. When interest rates rise, it becomes expensive for both companies and the common man to take loans, which can slow down economic growth. Although some sectors like oil and commodities may make profits in the short run due to high prices, this situation is not good for the entire economy.

Question 3: Will the rupee benefit from the Prime Minister’s appeal?

Expert opinion: If a large number of people and institutions follow PM Modi’s appeal, it can definitely have a positive impact on the Indian rupee. The mathematics behind this is very simple. India is the largest importer of gold and crude oil in the world. When we buy these things, we have to pay to foreign countries in US dollars. Due to this, the demand for dollars increases and our foreign exchange reserves decrease, due to which the rupee weakens.

If people reduce the purchase of gold, postpone going on foreign trips and reduce the consumption of petrol and diesel by working from home, then it will directly mean that our import bill is reducing. When imports decrease, demand for dollars will also decrease. This will control the current account deficit of the country and will reduce the pressure on the rupee. Apart from this, this appeal also gives a message that the country is trying to face economic challenges responsibly. This increases the confidence of investors and the rupee also benefits from it.

But, it is important to understand that all these are only short term measures. Appeals alone will not suffice to keep the rupee strong in the long run. This will require major economic reforms, strong exports, stable foreign investment, controlled inflation and a balanced financial management.

Question 4: If the rupee continues to weaken, what effect will it have on normal life?

Expert opinion: Continuous fall of rupee means double hit on your pocket. India imports about 90% of its requirement of crude oil, a lot of electronic goods, machinery and chemicals from outside. All this is paid in dollars. When the rupee becomes weak, we have to pay more money to buy these things. As a result inflation increases.

Its first and biggest impact is visible on the prices of petrol and diesel. Expensive fuel makes transportation expensive, which increases the price of every product including food items. Apart from this, things like your mobile phone, laptop, medicines and car will also become expensive. For those families whose children are studying abroad, the fees and living expenses will suddenly increase a lot.

Similarly, the problems of companies which have dollar debt will increase. However, there is also an advantage. Exporting companies like IT, pharma and textiles benefit from the weak rupee because the dollar payments they receive from abroad become worth more in rupees. Government and RBI have 6 big weapons to stop the fall of rupee:

• You can sell dollars by intervening in the foreign exchange market.
• Interest rates can be increased to attract foreign investment.
• Can discourage non-essential imports.
• To promote manufacturing in the country under initiatives like ‘Self-reliant India’.
• To control inflation and fiscal deficit.
• Reducing dependence on oil imports by increasing renewable energy.

Question 5: Should RBI increase the repo rate in the June MPC meeting or keep it as it is?

Expert opinion: The biggest challenge before the RBI at this time is to take a decision which will control inflation and also maintain the pace of economic growth. In view of the huge surge in wholesale inflation and economic uncertainties around the world, there is every possibility of RBI adopting a cautious approach.

If the repo rate is increased, it will reduce liquidity in the market and loans will become expensive. This will reduce the purchasing power of people and decrease in demand can help in controlling inflation. Higher interest rates will also attract foreign investors, which will support the rupee. But, its disadvantage will be that the EMI of your home loan, car loan and business loan will increase. It will become expensive for companies to take new loans, which may put a brake on investment and employment opportunities.

On the other hand, if RBI does not make any changes in the rates, it will continue to boost economic growth. This will be a relief for those sectors which are already struggling with rising costs and weak demand. At present, the inflation that has increased is mainly due to supply side reasons, such as oil prices. In such a situation, the root of the problem cannot be addressed just by increasing interest rates.

The best strategy is to create a balance. If inflation remains high for a long time and poses a threat to the economy, it may be necessary to increase the repo rate to a limited extent. But, if RBI feels that this inflation is temporary and due to external reasons, then it can adopt a policy of keeping a close watch on the situation by maintaining the current rates. Overall, the RBI’s decision will be an attempt to strike a fine balance between these four things – control of inflation, stability of the rupee, market confidence and pace of economic growth.

One morning it is printed on the front page of the newspaper – ‘Wholesale inflation rate reached a record 8.30 percent.’ There is another news on the other page of the same newspaper – ‘RBI has indicated to increase the repo rate in the coming months.’ Then in the evening, when you go to the petrol pump, you come to know that diesel and CNG are also going to be costlier by Rs 4-5. You may think that these are all separate problems, but in reality all three are three links of the same very dangerous chain, which economists call ‘the vicious circle of inflation’. This is a trap that starts with the war in West Asia and the impact of El Nino, but how?

First spark: Petrol-Diesel-CNG fire and El Nino’s impact

This vicious cycle of inflation starts with two big shocks:

1. Uncontrollable rise in fuel prices

At present, the prices of petrol and diesel are skyrocketing all over the world. The biggest reason for this is the increasing tension and war situation in the Middle East. This crisis has severely affected the oil supply through the ‘Strait of Hormuz’, through which about 20 percent of the world’s oil passes. The result was that the prices of crude oil jumped from $ 70 per barrel to around $ 126 per barrel.

This had a direct impact on the wholesale market of India. The country’s wholesale inflation rate (WPI) jumped to 8.30% in April 2026, which is the highest level in the last three and a half years (42 months). In March 2026, this rate was only 3.88%, i.e. a jump of more than double in just one month.

The ‘Fuel and Electricity’ sector had the biggest role in this entire increase, whose inflation rate directly reached 24.71%, whereas in March it was only 1.05%. The wholesale inflation rate of crude oil alone reached 88.06% and that of petrol reached 32.40%. According to Madan Sabnavis, Chief Economist of Bank of Baroda, ‘There is no sign of the war stopping, due to which oil prices will remain in the range of $ 100-120 per barrel and WPI inflation will remain high.’ Rating agency ICRA even said that wholesale inflation may increase further in May.

2. Dangerous shadow of El Nino

On top of that, the Meteorological Department (IMD) has predicted the south-west monsoon of 2026 to be below normal (only 92% of the long period average). The biggest reason for this is ‘Super El Nino’. This is a seasonal phenomenon in which the surface temperature of the Pacific Ocean increases by 2 degrees Celsius or more than normal, which weakens the monsoon winds and reduces rainfall. There is a 61% probability of it becoming active between May and July 2026.

This simply means – crop production will decrease. Especially major crops like paddy, soybean and cotton will be affected, due to which food inflation will increase.

Second shock: The burden from companies reaches you

These increased costs do not reach you directly, but through a chain:

1. Wholesalers and Companies

WPI figures show that not only fuel but also the manufacturing sector has been affected. The inflation rate of manufactured products increased from 3.39% in March to 4.62% in April, which is the highest level in 43 months. Prices increased in April in 21 out of 22 manufacturing groups tracked under WPI. Inflation of primary articles (raw materials) also increased from 6.36% to 9.17%.

2. Customer means burden on you

When crude oil itself becomes 88% expensive, the cost of petrol and diesel manufacturing companies will also increase by the same amount. RBI Governor Sanjay Malhotra has clearly said, ‘Oil companies cannot bear these losses for long.’ Oil companies are incurring losses of around Rs 30,000 crore every month. Experts estimate that after May 15, 2026, the prices of petrol and diesel may increase by Rs 4 to 5 per liter.

As the prices of petrol and diesel increase, transportation becomes expensive. Be it vegetables, milk or any other item. Everyone’s transportation costs increase. According to an estimate, if diesel becomes costlier by just Rs 5 per litre, the cost of freight increases by 3%.

Last blow: RBI’s helplessness and rising EMI

From here begins the real ‘vicious cycle’, which breaks the back of the common man:

1. RBI’s challenge and your EMI

RBI’s job is to keep inflation under control. Currently the repo rate is stable at 5.25%, but RBI has estimated retail inflation (CPI) at 4.6% for the financial year 2026-27. It is expected to reach 5.2% in the third quarter (Q3). Now the pressure has increased further after WPI reached 8.30%. The Chief Economist of Bank of Baroda has warned that after some time, WPI inflation also gets transformed into CPI i.e. retail inflation through higher input costs.

2. Direct effect of increase in repo rate

Repo rate is the rate at which RBI gives loans to banks. When RBI increases this rate, money becomes expensive for banks and banks pass this burden on you. The result of this is that the amount of your home loan, car loan or any kind of EMI increases. Experts believe that if inflation comes under control, then relief in EMI can be available only at the end of 2026 or beginning of 2027. RBI has currently adopted the strategy of ‘wait and see’, but the fear of further rise in inflation due to increasing tension in the Strait of Hormuz has made the situation more difficult.

After all, why is this a ‘vicious cycle’ of inflation?

This entire process works like a web and every link is interconnected:

• External shock: In West Asia, due to reasons like tension and El Nino, fuel and food items become expensive. WPI at 8.30% and fuel and power inflation at 24.71%.
• Transfer of Cost: Costs of companies and wholesalers increase (manufactured products inflation 4.62%), the burden of which they pass on to customers. Since May 15, petrol and diesel prices have increased by Rs 2-3 per litre.
• RBI action: To stop rising inflation (CPI estimated at 4.6%, up to 5.2% in Q3), RBI may be forced to increase the repo rate.
• Double blow to the common man: The result is that on one hand the expenses of your daily life increase (from petrol to vegetables). On the other hand, there is a danger of the EMI amount being paid by you also increasing.

This is called the ‘vicious cycle of inflation’, where one problem gives rise to another and ultimately the entire burden falls on the common man’s pocket. At present, the government and oil companies are trying to prevent this burden from passing on to you, but as the RBI Governor clearly said, the increase in prices is now ‘just a matter of time’.