By Manoj Kumar

NEW DELHI, (Reuters) – Rising prices and disruptions in supply following Russia’s invasion Ukraine may further depress an Indian economy that was already slowing down by COVID-19. This could pose risks for household spending as well as private investment, economists warned.

According to economists, India imports almost 80% of its oil requirements. However, a growing trade deficit could lead to a weakening rupee or higher inflation, especially after crude prices soared past $105/barrel last week. [O/R]

Aditi Gupta (an economist at Bank of Baroda) stated in Friday’s note that the “surge of oil prices as a consequence of the Ukraine crisis poses significant risks for the Indian economy.”

The three-month period ending December saw India’s economic growth slower than in the two previous quarters. This was despite new worries about the economy’s stagnation following Russia’s invasion.

Based on a survey with 38 economists, the median forecast was that Asia’s third-largest country’s gross domestic product would increase 6% annually in October-December after growing 20.1% over the April-June and 8.4% between July and September.

Forecasts for growth ranged between 3.0% and 7.5%. India will release its GDP data from December to Monday and the new estimates of the year ending March at 1200 GMT.

According to Sonal Varma (an economist at the Indian Institute of Technology), a rise in crude oil price could reduce India’s GDP by 0.2 percentage point. It also poses risks to corporate profit margins, as companies would be unable to absorb rising input costs. Nomura Holdings In a research note.

After two years of severe income loss from pandemics, India’s private consumption (which contributes almost 55% to its GDP) is still at a low level.

The three waves of COVID-19, which have decimated small businesses and caused huge job losses, have hit restaurants, education institutions, retail and tourism.

New Delhi claims that, despite its economic reforms, the economy is on the rebound and the vaccination program has had limited impact.

Supply shortages are a major problem in the near term. However, they should ease when the recovery starts to pick up,” Shilan Shah of Capital Economics, Singapore, said.

Reserve Bank of India (RBI) has cut its repo rates by total 115 basis point since March 2020 in order to absorb the shock of COVID-19. It has also maintained an accommodative monetary policy to aid economic recovery.

The RBI projects economic growth at 9.2% and 7.8% respectively for the next fiscal year.