Global Oil Price Shocks and Inflation in India: CPI Evidence on Supply-Side Transmission

This paper investigates the transmission of global crude oil price shocksto Indian retail CPI inflation using monthly time-series data. We examinethe stationarity of the data by the Augmented Dickey-Fuller (ADF) test 1and check whether a spurious regression takes place. We find that the dataare non-stationary in raw form but become stationary in I(1) form. Applying Engle-Granger cointegration, Vector Autoregression (VAR) dynamics, Impulse Response Functions (IRFs), and asymmetric specifications, wefind no long-run cointegration between Brent crude and domestic CPI,showing how state policy shields retail prices. However, short-run passthrough is delayed by 60 to 90 days, where price reductions are suppressed during market downturns.