The spike in oil prices and slowing private investments have been weighing on India’s economic growth, which is now seen at 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, a Reuters poll of economists showed on Tuesday.
Nearly three dozen economists were surveyed between July 21 and 27 for the poll, in which some experts flagged weaker real economic activity than the headline figures have suggested in the past five months since the Middle East crisis erupted.
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.
Weaker global growth could 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,” the economist told Reuters.
India’s economic growth for the 2026/2027 fiscal year could be lower than previously expected amid higher oil prices with the re-escalation of the Middle East war and the El Niño weather phenomenon, a senior official at the International Monetary Fund (IMF) said last week.
“The downside risks are probably twofold,” Ranil Salgado, the IMF’s resident representative for India and Bhutan, told Reuters in an interview.
“One is that the war is already starting to expand again, and that has implications for oil prices,” the official said, adding that the other risk was El Niño, which could lead to a poor monsoon.
Earlier this month, the IMF cut its GDP growth forecast for India by 10 basis points, from 6.5% expected in April, to 6.4%, for the 2026/2027 fiscal year ending March 31, 2027, due to higher energy prices.
By Charles Kennedy for Oilprice.com
