India’s Economic Growth Projected to Slow to 7.1% in April-June Quarter Amid Rising Oil Prices

Indian economic growth is projected to slow slightly to 7.1% in the April-June quarter, according to a median estimate from a Reuters poll of 58 economists conducted between August 17 and August 24. This follows a better-than-expected growth rate of 7.8% in the previous quarter. Forecasts for the data, which is due on August 31, ranged from 6.2% to 8.0%.

The growth during the quarter was largely supported by consumer spending and government expenditure. Last year’s Goods and Services Tax (GST) rate cuts and income tax reductions continued to bolster household disposable income and demand, helping cushion the impact of rising inflation. Goods and services exports, which rose more than 11% year-on-year during the quarter, also provided additional support to economic growth.

Despite this expansion, economists note that private investment remains subdued. While a nascent recovery in private investment began in the second half of last year, it has yet to become stronger, more durable, or broad-based. Geopolitical concerns, including uncertainty around the U.S.-Iran war, have made private players more cautious regarding capacity expansion plans in certain sectors.

External risks to Asia’s third-largest economy have increased as crude oil prices remain above $90 a barrel. Because India imports more than 85% of its oil, higher fuel and transport costs risk straining household budgets and increasing operational costs for businesses. Furthermore, business confidence slipped to a five-month low during the quarter, driven by difficult economic conditions and a rupee that has weakened more than 6% against the dollar this year.

Looking ahead, economists surveyed in the poll expect growth to lose further momentum in the coming quarters. GDP growth is projected to slow to 6.6% in the current quarter and 6.5% in the next, averaging 6.7% for the fiscal year—aligning closely with the Reserve Bank of India's projections. Gross value added (GVA) is estimated to have expanded by 7.2%. Additionally, the survey anticipates that the Reserve Bank of India will keep interest rates unchanged for at least six months.

If the current forecasts hold true, India will maintain its position as the world’s fastest-growing major economy, though ongoing headwinds from energy prices and private sector caution will require close monitoring by businesses and policymakers alike.

"While consumer demand and government expenditure continue to drive India's growth, the cautious stance on private investment and rising crude oil prices present notable challenges for the broader business ecosystem. Entrepreneurs and business leaders must navigate these macroeconomic headwinds carefully, focusing on operational efficiency and sustainable capital deployment as overall economic momentum moderates in the coming quarters." — Dr. Shishir Gupta, Founder & CEO, StartupLanes