India's Growth Outlook at Risk from Prolonged High Oil Prices

India's economic resilience is under threat due to high oil prices, which could hit growth through multiple channels if crude stays above $90 a barrel for a quarter or longer. According to Debopam Chaudhuri, chief economist at Piramal Group, sustained landed crude costs above $90 could create meaningful macroeconomic fault lines.

The country's economy is expected to retain strong momentum despite geopolitical tensions and trade uncertainty, with several reports putting April-June growth at 7.1%. However, economists are warning that prolonged high energy costs could hit inflation, corporate margins, the rupee, and the current account, eventually weighing on growth.

The crude import bill almost doubled from $9.82 billion in February to $18.9 billion in May, an increase of about 92.5% in three months. Even though the bill moderated to $14.7 billion in June and $13.7 billion in July, the April-July crude import bill stood at $63.4 billion, up 56.5% from the same period a year earlier.

Economists expect domestic demand to provide support despite the risks, with Radhika Rao, senior economist and executive director at DBS Bank, pointing to robust consumption and government capex as key drivers of growth. However, Chaudhuri cautioned that 7% growth should not be viewed as sufficient, arguing that India needs '8%+ growth that is broad-based, investment-led and employment-intensive.'