India Sees Oil Cuts And War Impact As Biggest Risks To Economy
The biggest threats to India’s economic growth would likely come from forces outside the country, Finance Minister Nirmala Sitharaman said, citing the risk of higher oil prices and the impacts from Russia’s war in Ukraine.
The effect on fuel prices from the recent surprise OPEC+ oil-output cut and “the spillover of all the decisions which are related to the Russia-Ukraine war" are “the two main things which I think I’d be more worried about than anything internal," she said in an interview in Washington on Saturday.
She also said possible recessions in the US or other developed countries could be a drag on India by hurting exports, particularly manufacturing.
Sitharaman was in the US to attend the International Monetary Fund’s Spring Meetings and to co-chair the Group of 20 finance chiefs’ gathering, along with Reserve Bank of India Governor Shaktikanta Das.
India’s $3.2 trillion economy is showing signs of fatigue as domestic and foreign demand gets clipped by high interest rates. Growth in the October-December period eased to 4.4%, from 6.3% in the previous quarter, due to waning consumption and investments.
The IMF earlier this week trimmed its growth outlook for India to 5.9% for the current fiscal year from April 1, from 6.1% forecast in January.
“The buoyancy of the economy will continue," she said, crediting part of that to policy reforms in recent years and digitization.
Concerns over weakening growth and the turmoil in the global banking sector prompted the RBI earlier this month to pause its most aggressive tightening cycle in a decade. The central bank said it will assess the cumulative impact of 250 basis points in rate increases so far and will act if needed.
Sitharaman said some countries can begin to “somewhat decouple" from the Federal Reserve, which has led the global drive to hike interest rates to curb inflation. A pause in tightening “can help growth momentum" in certain countries, which can respond to their economic challenges “with a bit more sense of what is most suitable for them."
India’s inflation is easing, with consumer prices rising 5.66% in March from a year earlier, the slowest pace in 15 months as growth in food costs moderated. The nation’s weather office has forecast a normal monsoon, which could lower grain and oilseed prices and slow inflation.
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