India defies Iran war oil shock to keep 8% growth on track

India’s stronger-than-expected first quarter growth has bolstered analysts’ confidence that it can sustain its momentum through the rest of the financial year and remain the world’s fastest-growing major economy – even as it remains exposed to high oil prices caused by the US-Iran war.

The Indian economy grew 7.8 per cent in the April-June quarter, comfortably beating the Reserve Bank of India’s forecast of 7 per cent growth, despite the disruption that the Middle East conflict has caused to global energy markets and financial sentiment worldwide.

“While energy will undoubtedly be a headwind for the economy, I suspect that it will sustain the momentum … and surprise analysts on the upside,” said Jamus Lim, an associate professor of economics at ESSEC Business School Asia-Pacific, who predicted annual growth “clocking in closer” to 8 per cent.

Global oil prices had risen far less than some analysts predicted at the start of the war, he said, when projections as high as US$200 per barrel were being bandied about.

Benchmark Brent crude rose 1.3 per cent to US$95.91 a barrel in Asian morning trading on Wednesday, after the US launched a barrage of renewed air strikes on Iran that briefly pushed prices to a five-week high.