Strong pace of economic growth seen in June quarter to continue, says FM

Finance minister Nirmala Sitharaman.(PTI)AI Quick ReadUnion finance minister Nirmala Sitharaman on Tuesday exuded confidence that the economy will grow at the strong pace witnessed in the June quarter despite external headwinds.

The economy expanded at a higher-than-expected rate of 7.8% in the three months through June from a year ago, as investment jumped and private consumption growth inched up. “I think the Q1 (FY27) growth showed the way, and I am very confident we will continue at that pace this year despite all the odds...I am confident that the budget, as presented on 1 February, will take us through this year with a comparable sort of growth as we saw in the first quarter,” she said at an event of the Hindu Business Line newspaper.

Responding to a question on the latest US law seeking to target importers of Russian energy with punitive tariffs, she said the government has already stated it is duty-bound to ensure our 1.4 billion people don't suffer from a shortage of this essential product and that “we will choose to source our energy from every corner of the world that suits us”.

The US move came as crude oil prices topped $100 per barrel amid the prolonged West Asia war, adding to concerns for India, which imports about 90% of its crude oil, more than a third of it from Russia. Sitharaman explained the practical difficulties of importing oil at a time when India's traditional suppliers in West Asia are hit by the ongoing conflict there.

If India says it will shun Russian oil, global energy prices will shoot up because the available pool has shrunk. The country also has to be mindful of the kind of crude oil its refiners can process, she said. Even if a particular variety is available, but Indian refiners can’t process that, “then what good is that supply for, and whose cause are we serving", she added.

“So we need to be practical to see to the requirements of our citizens. It poses a severe challenge, no doubt. But we will have to keep India's interest on top,” she added. In a statement last week, shortly after the US House of Representatives passed a bill that empowers President Donald Trump to impose tariffs of up to 100% on countries buying Russian energy, the ministry of external affairs (MEA) said that India would take all necessary steps to safeguard its energy security and economic interests.

The MEA also stressed that it had apprised Washington of the likely impact the proposed US law could have on bilateral ties and the global oil market. Estimates by Bank of Baroda show that a persistent $1 increase in crude prices can raise the country’s annual import bill by around ₹18,000 crore.

Elevated oil prices, experts have said, can potentially push up inflation and exert pressure on the current account balance in net oil-importing countries, although India is on a relatively strong footing to cope with the global shocks.

In August, India's retail inflation rose to a 20-month high of 4.82%, driven by higher fuel and food prices, taking it above the Reserve Bank of India’s medium-term target of 4% for a third consecutive month. Wholesale inflation also edged up to 9.92% in August from 9.78% in July, largely reflecting the price pressure in fuel.

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