BNP Paribas Warns of Stalled Growth for India Amid Rising Oil Prices

While India’s macro indicators showed early resilience through robust credit growth and vehicle sales, high-frequency data now signals a cooling period. Manufacturing activity has hit its lowest point since August 2021, accompanied by a noticeable decline in new orders and steel production. The services sector is mirroring this trend, with weakened cargo volumes and airline traffic highlighting a broader industrial slowdown.

The strain is particularly acute in rural areas, where a monsoon deficit and elevated food prices have hindered agricultural output. Reservoir levels have plummeted to 68% of capacity, down from 83% last year, directly impacting sowing cycles. With inflation reaching 4.8% in August—staying above the 4% target for three months—core price pressures have widened beyond volatile fuel and food costs. While strong government grain procurement and steady bank lending offer a buffer, the brokerage warns that these headwinds threaten to dampen the Reserve Bank of India’s projected 4.7% growth for the second quarter.