India may find it difficult to grow faster than 8% in FY23 if crude prices persist at the current level for too long, the finance ministry said on Thursday, warning the Russia-Ukraine conflict poses an upside risk to inflation as well.

The government is exploring all viable options, including import diversification, to procure crude at an affordable price, the finance ministry’s Department of Economic Affairs said in its monthly report for March.

Fertiliser prices have stabilised at higher levels and the availability situation is comfortable, but it remains a concern given the high dependence on Russia, it said. The surge in imports in March does not portend well for the economy in the year ahead, the report cautioned.

Capital Spending Offers Some Relief

The report flagged the impact of high crude prices on the economy.

“Affordability is desired as even the present level of international crude price, should it persist for a long time, may come in the way of India achieving a real economic growth rate north of 8% in FY23,” the report said. “The magnitude of the impact would depend on the persistence of high prices.”

Most independent economists have already pared their growth estimates for FY23 to the 7-7.5% range.

The government’s thrust on capital expenditure and improved corporate sector financial health provides for some resilience against these headwinds, it said.