India can grow over 8% despite oil shocks, crude impact overblown in narrative: Neelkanth Mishra
New Delhi, June 7
India's growth momentum remains strong and fears that crude price shocks will derail it are a "narrative problem, not reality," said Neelkanth Mishra, India's newly appointed Executive Director at the World Bank.
In an exclusive interview with ANI, Mishra spoke on Indian economy's outlook amid West Asia tensions, he argued that India is better placed than most energy importers to absorb higher oil prices without major damage to growth.
Mishra is also a member of the Prime Minister's Economic Advisory Council and is widely known for his work as an economist and market expert.
On growth, Mishra pointed out India expanded 7.1% in FY25 despite monetary and fiscal headwinds, meaning credit growth was slowing and the government was tightening the fiscal deficit. "If our growth was 7.1% despite fiscal and monetary tightening, it means without that, growth would have been higher," he said. Now, with monetary tailwinds as credit growth accelerates and the budgeted deficit not lower than last year, he estimates the economy was growing at 8%+ till February-March 2026. He cited ground indicators: 29% YoY car sales growth in May, strong mall footfalls and sales, and cement demand in high single digits. "You can't build inventory of cement...whatever is being bought is being consumed," he noted, making it hard to justify negative sentiment.
On crude, Mishra explained why India's vulnerability is lower than headlines suggest. Because Indian oil marketing companies are also refiners, they benefit from refining margins when diesel cracks rise. If pre-war crude was USD 70/barrel with a USD 20 diesel crack, landed cost was USD 90. Today at USD 100 crude and USD 50 crack, other countries face USD 150, while India faces USD 120. With diesel cracks now cooling and oil around USD 94-95/barrel, "India does not need to raise any further fuel prices." The feared implicit subsidy of ₹20-30/litre is not needed; the ₹8/litre cushion is sufficient as oil prices have eased due to inventory releases by China and the US.
He quantified the headwind: at USD 100/barrel, oil creates a 2% drag on growth -- like an aircraft slowing from 900 to 700 km/h due to headwinds. But fiscal support such as fertilizer price caps won't be needed by March 2027 as oil futures are at USD 80/barrel. At USD 80, the economy can re-accelerate. The only serious vulnerability he flagged is the currency, not growth.
Mishra stressed India is fiscally more disciplined than in past oil shocks. While energy price shocks remain a risk, the current combination of strong domestic demand, fading fiscal/monetary headwinds, and India's refining surplus means growth can stay near 7.5-8% even with elevated crude. The bigger challenge, he said, is managing the narrative until data proves the resilience.
— ANI
Reader Comments
I'm a small business owner and I can tell you - our sales have been growing steadily since January. But the real test will be monsoon and festive season. Let's not get too carried away by one economist's view. The currency risk he mentioned is real, especially if FIIs start pulling out.
Interesting point about refining margins helping India. I didn't know that! But what about the common man? Petrol prices are still high despite crude dropping. The ₹8 cushion he mentions needs to actually reach consumers. Otherwise it's just corporate profit booking. 🤔
As someone working in the auto sector, the 29% car sales growth in May is real. But it's more about pent-up demand and new models than underlying strength. Also, two-wheeler sales are still sluggish - that's the real indicator of rural demand. Urban India might be doing well, but Bharat hasn't fully recovered.
Economists and their models! 😅 Meanwhile, I'm still paying ₹105/litre for petrol in Mumbai. The 'narrative problem' might be real, but so are household budgets. Mishra is right about fiscal discipline though - at least we're not printing money like some countries. Let's hope crude stays below $90 for the next year.
Good to see someone from the PM's Economic Advisory Council giving realistic projections. The 2% drag due to oil is significant but manageable. What worries me more is unemployment data. Growth numbers mean little if jobs aren't being created.
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