Former International Monetary Fund (IMF) chief economist and Deputy Managing Director Gita Gopinath has warned that elevated oil prices could trim India’s growth down toward 6 per cent, below the International Monetary Fund’s current forecast of 6.5 per cent, as higher energy costs sap consumption and investment. Gopinath said the effects of the oil price shock are likely to persist well into next year and that a prolonged conflict in West Asia could make the downside risks substantially worse.
Oil prices to remain elevated into next year
Gita Gopinath told news agency ANI that oil prices are unlikely to fall quickly and estimated it may be “till the middle of next year for oil to come back to say $70 or $75 a barrel.” That sustained period of higher energy costs, she said, would weigh on household spending and business investment in India, dampening growth relative to the IMF’s baseline projection.
“Higher energy costs would affect consumption and investment, leading to slower economic growth than the IMF’s current projection,” she said, stressing that the persistence of oil-price pressure matters for near-term activity.
Conflict risk could push prices much higher
Ex-IMF chief Gopinath cautioned that the outlook could deteriorate sharply if tensions in West Asia continue and disrupt oil supplies. “If this continues for another month, we’re looking at oil prices that could go up to like $120 and $140 a barrel and could stay there for much longer,” she said. In that scenario, global growth, currently projected at 3.1 percent by the IMF, could fall toward 2.5 percent or even close to 2 percent, she added.
She also warned that such a global slowdown would place greater stress on India’s growth prospects, implying deeper downside risk than the roughly half-percentage-point gap between 6.5 percent and a possible 6 per cent outcome.
To reduce vulnerability to imported energy shocks, Gopinath emphasized the need for supply-side reforms that lower dependence on fossil fuels. She recommended “greater use of renewable and nuclear power” as part of a longer-term strategy to insulate the economy from oil-price swings.
Gopinath urged reforms to improve the ease of doing business and attract foreign investment. “Having a positive story on AI in terms of the fact that AI can be net positive for India. These are the kinds of actions that would help increase interest in India as a destination for investment capital and that would also take the pressure off the rupee,” she said, pointing to technology and investment as channels to bolster resilience.
Opportunities from shifting global trade patterns
Beyond energy and domestic reforms, Gita Gopinath highlighted shifting global trade dynamics as a potential opportunity for India. As the country expands trade ties and signs more agreements, including with the European Union, it can strengthen its role in global supply chains, she said.
“Shifting global trade patterns could create opportunities for India, particularly as the country expands trade ties and signs more agreements,” she noted, suggesting that deeper integration into global supply chains would help sustain investment and growth over the medium term.
Gita Gopinath’s assessment frames India’s near-term growth outlook as vulnerable to external shocks- particularly elevated oil prices and geopolitical risk- while pointing to renewable energy expansion, business reforms and investment-promotion measures as ways to mitigate those risks and seize new opportunities from global trade realignment.