Reserve Bank of India Governor Bimal Jalan said on Friday that current crude oil price levels were not a cause for worry.
"Oil prices being where they are, (it) is not a great problem just now," Jalan told reporters on the sidelines of a banking awards ceremony.
India imports 1.7 million barrels of oil a day and the pre-war spike in crude prices had pushed up inflation.
Oil prices fell four percent in European trade on Friday on expectations that the US advance on Baghdad and capture of the international airport could herald a resumption in Iraqi exports.
Benchmark Brent crude dropped 99 cents to $24.51 per barrel in London, while US crude futures fell $1 cents to $27.97. Oil has lost 25 per cent of its value in the past month from pre-war highs.
Finance Minister Jaswant Singh said on Thursday that the economy had successfully weathered the impact of volatility in world oil prices because of the war in Iraq and that the worst was over.