A possible US-led war against oil-rich Iraq would have a limited impact on India's inflation, the Reserve Bank of India's deputy governor Rakesh Mohan said on Thursday.

"If there is a war and oil prices rise there will certainly be an impact on inflation," he told reporters on the sidelines of a conference.

"But given our past experience when oil prices have risen from about $20 a barrel to the current levels, the inflation has hardly risen. So, the impact will be limited."

Government bond traders fear that a war could push up prices of crude, India's biggest import item, stoking domestic inflation and putting pressure on low interest rates.