BNP Paribas warns of cooling growth as India faces crude price surge

While India’s macro indicators showed initial resilience through robust credit growth and vehicle sales, high-frequency data now signals a cooling period. Manufacturing PMI has retreated to its lowest point since August 2021, accompanied by a softening in industrial production and new order growth. Service sectors, including cargo volumes and airline traffic, mirror this trend as domestic economic activity begins to lose its earlier pace.

Inflation reached 4.8 percent in August, marking the third consecutive month it has exceeded the 4 percent threshold. Beyond the immediate impact of volatile fuel and food costs, core inflation is climbing, driven by rising metal prices. Rural stability remains particularly fragile; reservoir levels have dropped to 68 percent of capacity—down from 83 percent last year—stunting agricultural output and further complicating the growth outlook for the coming quarters. Despite these headwinds, the brokerage notes that consistent government grain procurement and strong bank credit continue to provide a necessary floor for the national economy.