Media365
India’s economy could expand by more than 7 per cent this year, outpacing the Reserve Bank of India’s current forecast, if crude oil prices remain near $70 a barrel and tensions in West Asia continue to ease, according to Nagesh Kumar, an external member of the RBI’s Monetary Policy Committee (MPC).
Kumar told Bloomberg News that the easing of geopolitical tensions in West Asia has improved the outlook for Asia’s third-largest economy by reducing risks to both inflation and growth. His latest comments come after an earlier interview with the Financial Times, in which he said India’s growth could return to the 7%-plus range in FY27 if peace in West Asia held and crude prices stayed low.
“Assuming that the peace in West Asia is durable and crude prices continue to decline, one can expect that the Indian economy will have upside potential for the projected growth rates. I would expect it to go back to the 7%+ range,” Kumar said.
The RBI currently projects real GDP growth of 6.6 per cent for FY27.
Oil prices emerge as key growth driver
India remains one of the world’s largest crude oil importers, sourcing more than 80 per cent of its oil requirements from overseas markets. As a result, movements in global crude prices have a significant impact on inflation, household spending, corporate profitability and government finances.
According to Kumar, the macroeconomic outlook has improved considerably since the MPC’s June 3-5 policy meeting. He noted that crude oil prices have fallen sharply from around $110 per barrel during the recent escalation in West Asia to below $80, easing concerns over imported inflation.
Lower energy costs typically reduce transportation and manufacturing expenses, support consumer demand and improve India’s trade balance by lowering the import bill.
The RBI’s confidence in the economy has also been bolstered by stronger-than-expected growth in the previous financial year. Kumar noted that India’s FY26 growth rate came in at 7.7 per cent, marginally exceeding earlier estimates.
Inflation outlook brightens
Beyond growth, Kumar believes the decline in oil prices could strengthen India’s fight against inflation.
The RBI had projected consumer price inflation at 5.1 per cent before the peace accord in West Asia and before measures aimed at stabilising the rupee were announced. Since then, falling crude prices and currency-support measures have altered the outlook.
“The 5.1% CPI headline was projected before the peace accord was signed and the exchange rate stabilisation measures were effected. Hence, the projections of CPI would be subject to downside potential,” Kumar said.
He pointed to the central bank’s efforts to attract foreign currency deposits and the government’s taxation measures relating to investments in government securities as factors likely to support the rupee and help contain imported inflation.
However, Kumar cautioned that food inflation remains a key risk. A potential El Niño event could affect monsoon rainfall and agricultural output, although improved reservoir levels and increasing resilience in India’s farm sector may help mitigate the impact.
Fiscal discipline provides buffer
Kumar also highlighted the government’s fiscal consolidation efforts as a source of economic strength.
India’s fiscal deficit has narrowed significantly from 6.5 per cent of GDP in FY23 to 4.4 per cent in FY26, creating room for the government to continue investing in infrastructure and other growth-supporting sectors.
According to Kumar, this fiscal space would allow New Delhi to cushion the economy against any weakness in private consumption or investment caused by higher costs, supply-chain disruptions or global uncertainty.
Public investment has remained a key pillar of India’s growth strategy in recent years, particularly amid uneven private-sector demand.
FTAs could support exports
The MPC member also expressed optimism about India’s export prospects despite concerns about slowing global demand.
He said recently concluded free trade agreements with the European Union, the United Kingdom and other trading partners could create fresh opportunities for Indian exporters, especially in labour-intensive sectors such as textiles, apparel and manufacturing.
The agreements are expected to improve market access for Indian products and help offset some of the challenges posed by a weaker global economy.
Energy security remains a priority
While welcoming the recent decline in oil prices, Kumar said the latest geopolitical shocks underscore the need for India to reduce its dependence on imported fossil fuels.
He argued that the country should accelerate its clean-energy transition, expand domestic oil and gas exploration and strengthen strategic petroleum reserves to better withstand future supply disruptions.
The comments reflect a broader policy debate in India over energy security as recurring geopolitical crises continue to expose the vulnerabilities of oil-importing nations.
