India Capable of Racing Past 8% Growth; Concerns Overblown, Claims Top Economist
New Delhi: India’s economic growth remains robust, and concerns that high crude oil prices could severely derail the economy are exaggerated. These views were shared by Neelkanth Mishra, India’s new Executive Director at the World Bank. In an interview with ANI, Mishra stated that India is in a much better position to absorb high oil prices with minimal impact on growth compared to many other energy-importing economies.
Rapid Pace Despite Tightened Policies
According to Mishra, who is also a member of the Prime Minister’s Economic Advisory Council (EAC-PM), India’s economy grew by 7.1% in the financial year 2024-25, despite fiscal and monetary tightening.
“If our growth stood at 7.1% despite fiscal and monetary tightening, it implies that without these constraints, the growth rate would have been even higher,” he noted.
Aiming for over 8% Growth Rate
Mishra pointed out that improved credit growth and a less restrictive fiscal stance indicate that by February–March 2026, the economy was expanding at an annual rate of over 8%.
As evidence of the economy’s underlying strength, he cited several indicators:
- A 29% year-on-year increase in car sales in May.
- Robust footfall and sales in shopping malls.
- High single-digit growth in cement demand.
“You cannot hoard cement stock… whatever is being purchased is being actively utilized,” he emphasized.
Impact of Oil Shocks is Overstated
Mishra argued that the impact of oil price fluctuations (oil shocks) on India is often less severe than projected, largely because domestic oil marketing companies also benefit from refining operations.
Explaining this dynamics, he mentioned that while high crude prices increase costs, healthier refining margins help cushion the blow to some extent. Currently, crude oil is hovering around $94–$95 per barrel. With diesel refining margins softening, Mishra stated that India does not need to hike fuel prices any further.
He dismissed fears of large indirect fuel subsidies as baseless.
The Economist’s Rationale
“The feared indirect subsidy of ₹20–₹30 per liter is not required. A cushion of ₹8 per liter is sufficient, especially since inventory releases by China and the US have helped cool down oil prices,” Mishra explained.
While he estimates that $100-per-barrel oil could dent growth by about 2%, he maintained that this impact would not be enough to derail the economy. He beautifully compared this situation to an aircraft flying against a headwind. Furthermore, if oil prices drop toward the $80-per-barrel mark as suggested by futures markets, support measures like capping fertilizer prices might not even be necessary by March 2027.
Scenario Changes if Crude Prices Drop
According to Mishra, if crude oil prices decline, the economy could see a massive resurgence.
While acknowledging that energy prices remain a risk factor, he concluded that India’s surplus refining capacity, robust domestic demand, and easing fiscal and monetary headwinds should comfortably keep the growth rate within the 7.5%–8% range—even if crude prices remain elevated.
“The biggest challenge right now is simply managing the narrative until the hard data conclusively proves this underlying strength,” he said.
