India’s economic growth could take a hit if crude oil prices remain elevated, with consultancy firm EY warning that GDP expansion may slip to around 6 percent in FY27 if the Indian crude basket averages $120 per barrel.
According to the firm’s latest assessment, persistently high oil prices could significantly impact macroeconomic stability by pushing up inflation and weakening overall demand conditions.
The estimate marks a sharp downside from earlier projections of 6.8–7.2 percent growth for FY27, highlighting the growing risks from global energy market volatility.
“If the ICB price averages $120 per barrel in FY27, India’s real GDP growth may slip to about 6 percent and CPI inflation may increase to 6 percent... To minimise the adverse impact on fiscal deficit, increased energy prices should be passed on to retailers to a relatively larger extent,” said EY India Chief Policy Advisor DK Srivastava.
The warning comes at a time when geopolitical tensions, particularly in West Asia, have kept crude prices elevated.
Higher oil prices tend to widen India’s import bill, given its heavy reliance on imported energy, while also feeding into domestic inflation.
EY noted that inflation could rise towards the upper tolerance band of the Reserve Bank of India if crude sustains at such high levels.
This could limit the central bank’s room to support growth through accommodative monetary policy.
The impact of expensive crude is multi-layered for the Indian economy. Higher fuel costs increase input prices for industries, raise transportation expenses, and ultimately reduce consumer purchasing power.
This combination can dampen both investment and consumption, the two key drivers of growth.
The assessment also underscores the sensitivity of India’s growth outlook to external shocks.
While the country remains among the fastest-growing major economies, sustained pressure from energy prices could alter its trajectory in the coming fiscal year.
Economists have increasingly flagged crude oil as a key risk variable for FY27, with multiple agencies cautioning that prolonged geopolitical disruptions could further weaken growth prospects if prices remain elevated.
