India's GDP Growth May Slow to 6.6% Amid West Asia Crisis, Says Report

India's GDP growth is projected to moderate to 6.6% in the current fiscal from the earlier estimated 7.1%, and energy and food security reforms would be essential to achieve the Viksit Bharat goal by 2047, according to a S&P Global report released on May 5.

S&P Global and Crisil's joint report, titled 'India Forward', said India is facing external economic shocks from energy supply disruptions, rising oil and gas prices and currency volatility, and India should devise a comprehensive energy storage policy to create strategic buffers.

"As the duration of the West Asia crisis rises, we see newer stress points emerge. The rupee weakening and oil prices rising are a double whammy of sorts. It all creates pressure on growth," Crisil Chief Economist Dharmakirti Joshi said while releasing the report, reported PTI.

Joshi said amid the West Asia conflict, India should focus on energy and food security, and the fertiliser sector.

"If the crisis continues, the winter crop could face (fertiliser) shortages, but for summer crops, we are reasonably well placed," he noted.

Calling for more reforms to deal with the crisis, Joshi said India needs to become more competitive to take advantage of the recently signed free trade agreements (FTAs), which give market access through lower tariffs.

"You got market access through lower tariffs...Now what you need to do is become more competitive, and that requires a variety of reforms," Joshi said.

Since the beginning of the war in West Asia on February 28, crude oil prices have risen significantly, stoking inflation fears. Crude prices soared to a four-year high of $126 per barrel on April 30, from about the $73 level before the war. Brent fell to 97.77 USD/Bbl on May 6.

Joshi said higher crude oil prices are likely to push up WPI inflation more than CPI inflation because global fuel costs have not been fully passed on to households. While commercial LPG prices have been raised, the government has kept petrol, diesel and domestic LPG prices unchanged to shield consumers from the West Asia crisis.

Rising External Pressures

India imports over 85% of its crude oil requirements, making the economy vulnerable to global supply shocks and currency fluctuations, according to reports.  

The Economic Times also reported that prolonged high oil prices could widen the current account deficit, weaken the rupee and raise inflationary pressures, particularly for energy-importing emerging economies like India.

 (With inputs from PTI.)