Structural reforms, strong fundamentals and demand to support India`s growth
India is expected to remain resilient despite elevated energy prices driven by the West Asia conflict, supported by strong economic fundamentals, structural reforms and healthy domestic demand, according to a report released on Wednesday.
A report by Crisil said that while a sustained energy shock could increase cost pressures across sectors and weigh on economic activity, India's growth outlook remains comparatively strong.
Although crude oil prices have moderated following the announcement of a memorandum of understanding between the US and Iran this week.
The report further stated that India's diversified economic structure and strong domestic demand could help cushion the impact of higher energy costs.
It identified that land transport, mining, agriculture, chemicals, rubber and plastic products among the sectors most directly exposed to higher energy prices.
These industries play a critical role in the economy and serve as key inputs for several downstream sectors.
In addition, pharmaceuticals, electronic products, processed food and metal products are likely to experience higher input costs if energy prices remain elevated.
However, sectors such as financial services, real estate and professional services face relatively limited direct exposure to energy related cost pressures despite accounting for a significant share of economic output.
Moreover, the report highlighted measures that could help mitigate the impact of rising energy prices.
Government support for fertiliser imports and domestic production, along with continued policy interventions, could help reduce pressure on the agriculture sector, it said.
According to Crisil, India's economy has benefited significantly from structural reforms and stronger corporate balance sheets in recent years, which should provide a buffer against external shocks.
Despite higher energy prices, the country's long-term economic fundamentals remain intact.
India's broad-based growth drivers are expected to support economic resilience in the face of global uncertainties, according to Crisil.
