Moody's has slashed India's growth estimate for the current year 2022 to 9.1 per cent, from 9.5 percent earlier, saying high fuel and fertilizer import bill could limit the government's capital expenditure.
According to a PTI report, the rating agency in its Global Macro Outlook 2022-23 (March 2022 Update) titled: Economic Growth will suffer as fallout from Russia's invasion of Ukraine builds, said that India's growth is likely to be 5.4 percent in 2023.
With oil accounting for 80 percent of its import bill, India is particularly vulnerable to high oil prices. High diesel prices will only stoke inflation which is already pinching the common man.
Earlier last week, Gita Gopinath, the First Deputy Managing Director of the IMF raised the red flag on the potential impact of higher oil prices, "India relies heavily on energy imports and with prices going up the way they are, that has implications for purchasing power of Indian households. Also inflation in India is close to around 6 percent range, which is at the upper end of the inflation band. So, this obviously has implications for monetary policy in the country."
The Energy Information Administration has been quoted saying oil prices will remain higher than $100 per barrel in the coming months, reflecting the geopolitical risks from the war in Ukraine and the tight energy markets with the current and potential future sanctions against Russia.
The government has not announced any fuel price hike, but with elections over and the results out, the government may make an announcement soon.
Sales of passenger vehicles and two-wheelers continue to be in the slow lane thanks to a dampened customer spending due to high fuel prices. The loss of incomes due to the pandemic has also affected consumer sentiments and for the auto sector, this has affected entry-level motorcycle sale.