Growth outlook intact despite West Asia war: RBI MPC member

Mumbai: Conflict in the Middle East poses some immediate-term challenges for the Indian economy but is unlikely to dent long-term economic growth momentum, an external member of the RBI’s rate-setting panel has said.

Going forward, there is a need for fiscal and monetary policies to work in a coordinated manner to push GDP growth to a higher trajectory, Nagesh Kumar said.

In the present scenario, a hike in oil prices, export disruptions and the impact on remittances have been identified as the immediate challenges on the growth front.

In the immediate short run, he noted, the conflict is escalating with US-Israel strikes and oil prices are likely to harden. “Hopefully, the crisis will be resolved soon, given the high stakes that the world has in the region,” he said.

Kumar added that diversification of oil sourcing could help mitigate risks. The opening up of Venezuelan oil supplies for India is also likely to be helpful as it diversifies options.

He said that if the Middle East crisis ends quickly and sanctions on Iran are lifted, India may gain from cheaper oil supplies. Despite geopolitical tensions, Kumar maintained that the inflation outlook remains benign, with CPI projected at around 2.5 per cent in FY2026. He said the brightening growth outlook and benign inflation could keep India in the “Goldilocks” zone longer, while coordinated fiscal and monetary policies can help lift GDP growth from about 7 per cent to around 8 per cent.