A new report from EY has cautioned that India's GDP growth could decline to 6 percent in the fiscal year 2026-27 (FY27) if the Indian crude basket averages USD 120 per barrel. This projection is lower than the estimates provided by several global agencies.
Global Forecasts vs. EY's Warning
The International Monetary Fund (IMF) has projected India's GDP growth at 6.5 percent for FY27. The Asian Development Bank (ADB) and the World Bank are more optimistic, forecasting growth rates of 6.9 percent and 6.6 percent, respectively. However, EY's analysis suggests that sustained high crude oil prices could dampen economic momentum.
Impact of Crude Oil Prices
India imports over 80 percent of its crude oil requirements, making it highly vulnerable to global price fluctuations. A sustained average of USD 120 per barrel for the Indian crude basket would increase the country's import bill, widen the current account deficit, and put upward pressure on inflation. This could lead to higher input costs for businesses, reduced consumer spending, and a slowdown in industrial activity.
Government Measures and Outlook
The government has taken steps to mitigate the impact of high oil prices, including excise duty cuts and efforts to diversify import sources. However, EY notes that these measures may only provide partial relief. The report emphasizes the need for structural reforms to reduce India's dependence on imported oil, such as boosting domestic production, accelerating the adoption of renewable energy, and promoting energy efficiency.
EY's warning comes amid volatile global crude markets, driven by geopolitical tensions and supply constraints. While the baseline scenario remains aligned with global forecasts, the report urges policymakers to prepare contingency plans to safeguard economic growth.
