Oil Price Shock Dents India's Economic Growth Prospects

Economists have cut India's GDP growth forecast due to the recent spike in oil prices and slowing private investments.

The latest Reuters poll of nearly three dozen economists showed that India's economic growth is now expected to be 6.6% in the fiscal year to March 2027, a full percentage-point drop from the 7.7% GDP growth in the prior fiscal year.

This downgrade comes as the Indian economy has relied on government spending while private investment has been weak amid the price shock from the spike in crude prices and its still-unknown full effect on India's economy, current accounts, and government finances.

Upasana Chachra, chief India economist at Morgan Stanley, warned that weaker global growth could deter Indian firms from capacity and investment expansions, saying 'even where policy support is in place, firms may defer large capex decisions if demand visibility weakens.'