The Indian economy continues to recover from a temporary disruption caused by the third wave. However, the FY23 outlook is clouded by the ongoing Russia-Ukraine war and the consequent impact on commodity prices. Higher commodity prices, especially crude oil (given India’s high import dependence), pose downside risks to India’s economic recovery. The range of possibilities for how the conflict might ultimately be resolved remains very high, thereby accentuating uncertainty over the economic outlook. While fiscal and monetary policies remain supportive of economic growth revival in this highly uncertain environment, high energy prices would eat policy space through lower revenues, higher subsidies, and inflationary pressures.
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