Weak demand, higher oil prices may drag India's GDP growth to 6.6% this fiscal, says poll
India imports around 90% of its crude oil requirements, making it particularly vulnerable to sustained increases in energy costs.
- Jul 28, 2026,
- Updated Jul 28, 2026 3:33 PM IST
India's economic growth is likely to lose momentum this financial year as weak private investment and rising oil prices weigh on domestic demand, according to a report by Reuters.
The median forecast from a Reuters poll of 42 economists, conducted between July 21 and 27, projects India's gross domestic product (GDP) to grow 6.6% in FY2026-27, down from 7.7% in FY2025-26. Growth is then expected to improve slightly to 6.8% in FY2027-28.
The findings suggest that while India remains one of the world's fastest-growing major economies, concerns over slowing domestic demand and global uncertainties continue to cloud the outlook. Similar Reuters polls across Asia also found that higher oil prices and weak domestic demand are weighing on growth prospects in China, Thailand, Indonesia and the Philippines.
"We believe the headline print likely overstates the true pace of underlying activity," said Kunal Kundu, India economist at Societe Generale.
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Kundu added that while investment and inventory accumulation supported growth, "measurement distortions...have likely flattered the real growth outcome, leaving the headline print stronger than the underlying macro reality."
Official data showed private investment expanded 10.8% in the January-March quarter, marking its fastest pace under the revised GDP series. However, economists remain sceptical about whether private investment can sustain that momentum despite healthy corporate balance sheets.
Many companies are reportedly holding back on major capital expenditure plans amid uncertainty over the strength of domestic demand, a trend that could affect job creation for the millions entering India's workforce every year.
"A weaker global growth backdrop, slower trade expansion, or softer domestic consumption and investment demand could...weaken the incentive for firms to undertake fresh capacity expansion. Export-oriented sectors could also be particularly exposed," said Upasana Chachra, chief India economist at Morgan Stanley.
"Even where policy support is in place, firms may defer large capex decisions if demand visibility weakens."
The report noted that the US-Israeli war on Iran has pushed up global crude oil prices, increasing the risk of higher inflation and slower economic growth. India imports around 90% of its crude oil requirements, making it particularly vulnerable to sustained increases in energy costs.
Higher fuel prices have also raised transport costs, adding to inflationary pressures and complicating the Reserve Bank of India's policy decisions. Economists expect the RBI to keep interest rates unchanged at its August monetary policy meeting while assessing the impact of elevated energy prices on inflation and growth.
"We do not see risks of the central bank sounding dovish in August," analysts at BofA said.
"We see a hold and messaging to emphasise risks on inflation management over the medium term, while waiting for clarity on growth in the near term."
India's economic growth is likely to lose momentum this financial year as weak private investment and rising oil prices weigh on domestic demand, according to a report by Reuters.
The median forecast from a Reuters poll of 42 economists, conducted between July 21 and 27, projects India's gross domestic product (GDP) to grow 6.6% in FY2026-27, down from 7.7% in FY2025-26. Growth is then expected to improve slightly to 6.8% in FY2027-28.
The findings suggest that while India remains one of the world's fastest-growing major economies, concerns over slowing domestic demand and global uncertainties continue to cloud the outlook. Similar Reuters polls across Asia also found that higher oil prices and weak domestic demand are weighing on growth prospects in China, Thailand, Indonesia and the Philippines.
"We believe the headline print likely overstates the true pace of underlying activity," said Kunal Kundu, India economist at Societe Generale.
Don't Miss: ITR filing 2026: Pay ₹11-₹24 or file for free? Compare tax filing charges across platforms
Kundu added that while investment and inventory accumulation supported growth, "measurement distortions...have likely flattered the real growth outcome, leaving the headline print stronger than the underlying macro reality."
Official data showed private investment expanded 10.8% in the January-March quarter, marking its fastest pace under the revised GDP series. However, economists remain sceptical about whether private investment can sustain that momentum despite healthy corporate balance sheets.
Many companies are reportedly holding back on major capital expenditure plans amid uncertainty over the strength of domestic demand, a trend that could affect job creation for the millions entering India's workforce every year.
"A weaker global growth backdrop, slower trade expansion, or softer domestic consumption and investment demand could...weaken the incentive for firms to undertake fresh capacity expansion. Export-oriented sectors could also be particularly exposed," said Upasana Chachra, chief India economist at Morgan Stanley.
"Even where policy support is in place, firms may defer large capex decisions if demand visibility weakens."
The report noted that the US-Israeli war on Iran has pushed up global crude oil prices, increasing the risk of higher inflation and slower economic growth. India imports around 90% of its crude oil requirements, making it particularly vulnerable to sustained increases in energy costs.
Higher fuel prices have also raised transport costs, adding to inflationary pressures and complicating the Reserve Bank of India's policy decisions. Economists expect the RBI to keep interest rates unchanged at its August monetary policy meeting while assessing the impact of elevated energy prices on inflation and growth.
"We do not see risks of the central bank sounding dovish in August," analysts at BofA said.
"We see a hold and messaging to emphasise risks on inflation management over the medium term, while waiting for clarity on growth in the near term."