Indian economy remains resilient despite oil shock: IMF

India's economy has demonstrated remarkable resilience despite the ongoing West Asia conflict and elevated crude oil prices and retained the status of the fastest growing among major economies in the world despite energy price turbulence stemming from the ongoing geopolitical conflict in the Middle East, a senior executive of the International Monetary Fund (IMF) said in a media briefing. IMF described India as a key driver of global economic growth even as oil-importing nations face mounting external and fiscal pressures.

Speaking at the IMF's global press briefing, Julie Kozack, Director of the IMF's Communications Department, said India's real gross domestic product (GDP) expanded 7.8 percent in the latest quarter, exceeding both IMF staff expectations and broader market consensus. The stronger-than-anticipated performance was led by robust growth in the services sector and resilient exports, reinforcing confidence in India's underlying economic momentum.

The assessment comes at a time when Brent crude prices are hovering close to US$ 108 a barrel following months of military escalation in the Middle East, disruptions in the Strait of Hormuz, and attacks on regional energy infrastructure. Higher energy prices have emerged as one of the biggest risks confronting large oil-importing economies, including India.



Oil remains the principal external risk
Responding to questions on the impact of expensive crude, Kozack acknowledged that rising oil prices typically weaken the balance of payments of importing countries while also creating fiscal pressures, particularly where governments continue to subsidise energy consumption. "What we see, of course, when energy prices increase, is that it puts pressure on the balance of payments of energy importers. It also can put pressure on their fiscal positions," she said.

However, she noted that India's situation differs from many other import-dependent economies because the oil shock has arrived while the country is in a comparatively stronger macroeconomic position. According to the IMF, India's healthy growth trajectory has helped cushion the adverse effects of higher energy prices, although the Fund continues to monitor developments closely ahead of its October World Economic Outlook (WEO).

The IMF's assessment indicates that although elevated crude oil prices remain a major external headwind for India, the country's strong domestic economic fundamentals are helping absorb much of the shock. Robust household consumption, sustained expansion in the services sector and resilient export growth have provided important buffers against rising energy costs, enabling the economy to maintain healthy growth momentum despite heightened geopolitical tensions and volatility in global oil markets.

Statistical reforms receive IMF endorsement
Beyond growth, the IMF also welcomed India's efforts to modernise its national statistical framework amid recent debates surrounding GDP measurement. Kozack said the latest GDP estimates incorporated both a new Index of Industrial Production (IIP) and a new Producer Price Index (PPI) series, describing them as important improvements that would strengthen the quality and accuracy of India's macroeconomic statistics.

The IMF encouraged Indian authorities to continue enhancing statistical transparency and data quality, indicating that stronger economic measurement would improve policy formulation and investor confidence over time. The endorsement comes as India has undertaken substantial revisions in its statistical architecture, including updated industrial production and price indices aimed at better reflecting the structure of the modern economy.

Global economy pulled in opposite directions
While maintaining a constructive view on India, the IMF painted a more cautious picture of the global economy, arguing that world growth is being influenced by two powerful but opposing forces. On one side lies a negative supply shock driven by elevated prices of oil, natural gas, fertilisers and food commodities. On the other is a positive demand shock generated by rapid investment in artificial intelligence, semiconductor manufacturing and digital infrastructure. According to the IMF, these contrasting trends have so far allowed the global economy to remain resilient despite six months of conflict in the Middle East.

The Fund said world growth remains broadly on track at around 3%, although uncertainty continues to stay exceptionally high because the energy shock has not yet fully subsided. The IMF warned that refined fuel prices remain elevated, shipping through the Strait of Hormuz has fallen dramatically compared with pre-war levels, and many countries will eventually need to replenish strategic oil and gas reserves. Combined with rising winter energy demand in the Northern Hemisphere, these factors could keep commodity markets volatile in the coming months.

Higher bond yields add another challenge
Apart from elevated energy prices, the International Monetary Fund (IMF) identified rising sovereign borrowing costs as another significant challenge facing emerging and developing economies. According to IMF Communications Director Julie Kozack, benchmark 10-year government bond yields in major advanced economies, including the United States, France and Japan, have climbed to multi-year highs as investors demand higher term premiums. As a result, even countries that have successfully narrowed their sovereign credit spreads are now confronting higher overall financing costs because those spreads are being added to increasingly expensive global benchmark yields.

The IMF said this tighter global financial environment underscores the importance of credible medium-term fiscal strategies rather than abrupt austerity measures. It urged governments to pursue gradual fiscal consolidation through well-defined plans to reduce deficits and debt, while simultaneously implementing structural reforms that boost productivity, encourage investment and strengthen long-term economic growth. Such a balanced approach, the Fund said, would enhance economic resilience and improve countries' ability to withstand future external shocks.

Outlook remains constructive for India
For India, the IMF's latest assessment reinforces expectations that the country will continue to outperform most major economies despite heightened geopolitical risks. The Fund reiterated that India remains a critical engine of global growth, supported by resilient services activity, strong exports and improving macroeconomic fundamentals.

Nevertheless, policymakers are likely to remain vigilant as crude oil prices, shipping disruptions in West Asia and tighter global financial conditions continue to pose risks to inflation, external balances and fiscal management. The IMF said its updated forecasts for India will be released as part of the October 2026 World Economic Outlook, providing a more comprehensive assessment of the evolving global energy shock and its implications for the Indian economy.


DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com