India’s GDP Growth Set To Moderate to 6.6% Amid Global Energy and Security Headwinds

New Delhi: India’s economy in terms of gross domestic product (GDP) is projected to moderate to 6.6 per cent in the current fiscal from the earlier estimated 7.1 per cent, and energy and food security reforms would be essential to achieve the Viksit Bharat goal by 2047, according to rating agencies.

“India is facing external economic shock 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,” said S&P Global Ratings and Crisil in their joint report.

“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.

Joshi further said that 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 $/Bbl on May 6.

“Since the pass-through of global crude oil prices has not happened to households, the WPI inflation numbers, which also account for imported items, will come in higher than the CPI,” Joshi said.