Crude oil prices are unlikely to drop back to pre-Gulf war levels of $65 per barrel, according to Prabhudas Lilladher, as geopolitical tensions and supply chain disruptions keep oil elevated near $92-95 per barrel in FY27.
Impact on Import Bill and Subsidies
The brokerage expects the sustained high prices to widen India's import bill, inflate subsidy costs, and put upward pressure on the current account deficit (CAD). Demand is also likely to take a hit in the coming months.
In its report dated June 12, 2026, Prabhudas Lilladher stated, "We believe crude prices are unlikely to revert to pre-Gulf war conflict levels of USD 65 per barrel. The second level impact of high crude prices and supply chain disruption is likely to impact demand over coming months."
With average oil prices pegged at $92-95 per barrel for FY27, the import bill is estimated to rise by $70 billion to around $180 billion for 4.3 million barrels per day. Higher freight rates and insurance costs will further add to landed fuel costs.
Fiscal and External Pressures
The fiscal impact appears steep. Fertilizer and input prices have surged, with urea up 120%, and DAP, sulphur, and ammonia rising 38%, 87%, and 87% respectively. The report notes, "This is likely to significantly inflate the budgeted subsidy bill of Rs 1.7 trillion."
Despite the government raising petrol and diesel prices by Rs 8-9 per litre and cutting excise, losses on petroleum products persist. Heavy losses on domestic LPG will also strain fiscal math.
Externally, stress is building. CAD is currently estimated at around 2% of GDP in FY27, but Prabhudas Lilladher expects "an upward bias given geopolitical uncertainty and sluggish global trade despite recent fiscal and monetary interventions." A depreciating currency, coupled with Rs 3 trillion of FII outflow, compounds the strain.
Policy Measures and Outlook
In response, the government has imposed restrictions on gold imports after $80 billion in FY26. The brokerage expressed hope that "irritants around taxation and regulations regarding FPI investment in both debt and equity markets are being relaxed, which will have positive implications in the long term."
Prabhudas Lilladher added that the impact of high crude demand and disrupted supply chains will unfold over the coming months. With oil staying elevated, the fiscal cushion will depend on how much subsidy and excise revenue is sacrificed to contain retail fuel prices. Until geopolitical risks ease, CAD and fiscal arithmetic remain key watchpoints for markets and policymakers.
