New Delhi: Energy price spikes and supply constraints due to the West Asia conflict are an economic stress for India, with fiscal pressures also likely to come under strain, according to a joint report by S&P Global and Crisil titled ‘India Forward’.
The shock could serve as an opportunity to tackle near-term bottlenecks, supporting longer-term growth, it noted.
As the conflict extended beyond two months, rising bond yields, higher inflation, and a weakening rupee are weighing on growth, said DK Joshi, chief economist at Crisil.
According to Crisil, India’s gross domestic product (GDP) growth is expected to moderate to 6.6 per cent in FY27 from 7.1 per cent estimated earlier. GDP growth is estimated at 7.6 per cent for FY26, based on official estimates.
Describing the conflict as the largest energy shock on record, the report said it was testing India’s resilience, with spillovers into freight and insurance costs, supply chains and fertilisers.
India imports 45-50 per cent of its crude oil from West Asia.
Joshi outlined three policy priorities for India going ahead: energy security, food security and economic reforms.
He emphasised that deregulatory measures and structural changes will be key to improving the business environment and strengthening India’s appeal as an investment destination.
“If the crisis continues, the winter crop could face (fertiliser) shortages, but for summer crops we are reasonably well placed,” said Joshi.
India’s post-Covid fiscal consolidation, reducing the fiscal deficit from 9.2 per cent of GDP in FY21 to 4.4 per cent in FY26, now faces its toughest challenge, the report noted.
India’s debt-to-GDP ratio is projected to rise to 57.5 per cent from 56.1 per cent in FY26.
Source link
#Energy #shock #strains #Indias #growth
