India's GDP Growth Forecast Slashed by Full Percentage Point Amid Oil Price Shock

India's economic growth forecast has been revised downward by economists due to the recent spike in oil prices and slowing private investments. The forecast for India's GDP growth rate for the fiscal year ending March 2027 is now at 6.6%, a full percentage-point drop from the previous fiscal year's rate of 7.7%. This revision comes after a Reuters poll of nearly three dozen economists, who were surveyed between July 21 and 27.

The Indian economy has been relying heavily on government spending while private investment has been weak due to the price shock caused by the spike in crude oil prices. Weaker global growth could also deter Indian firms from capacity and investment expansions, according to Upasana Chachra, chief India economist at Morgan Stanley. 'Even where policy support is in place, firms may defer large capex decisions if demand visibility weakens,' she said.

The International Monetary Fund (IMF) has also expressed concerns about the potential impact of higher oil prices on India's economy. Ranil Salgado, the IMF's resident representative for India and Bhutan, stated that 'the downside risks are probably twofold.' He pointed to the ongoing Middle East war and the El Niño weather phenomenon as two key factors that could lead to a poor monsoon and further reduce economic growth.