A sustained surge in crude oil prices amid the US-Israel-Iran conflict could shave off more than 50 basis points from India’s gross domestic product (GDP) growth in FY27, economists warned on Wednesday. The Economic Survey 2025-26 projected real GDP growth for FY27 at 6.8–7.2%.
Brent rose to $91.37 per barrel on Wednesday, up 4.07% from Tuesday.
Oil Price Transmission
Rajani Sinha, Chief Economist at CARE Ratings, highlighted India’s vulnerability as a major crude oil importer to sustained high oil prices. She stated that if crude oil prices remain above $100 per barrel, it could shave off more than 70 basis points (0.7 percentage points) from India’s GDP growth in FY27. Her pre-war FY27 GDP growth forecast stood at 7.2%.
Gaura Sengupta, Chief Economist at IDFC First Bank, provided a calibrated view. She noted that the baseline real GDP growth forecast for FY27 stands at 7.5%. However, if crude oil prices average around $90 per barrel for a full year, real GDP growth is expected to moderate to 7%, implying a drag of around 50 basis points. This impact would stem primarily from higher import bills, a widened current account deficit, elevated input costs for industries, and potential second-round effects on inflation and consumer spending, assuming limited or delayed pass-through to retail fuel prices to shield consumers.
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Meanwhile, HDFC Bank estimated a 20–25 basis points fall in GDP growth for every 10% increase in oil prices. “In our base case, we estimate GDP growth at 7.2% in FY27. However, this was based on commodity prices remaining contained and oil averaging between $60-70 per barrel. We estimate that for every 10% increase in oil prices (sustainably), GDP could be lower by 20-25 bps,” HDFC Bank said in its analysis on West Asia Conflict.
Strategic Vulnerability
India is highly dependent on crude imports, with 89% of its crude oil requirements met through imports. Half of these imports come from Gulf nations and are transported through the Strait of Hormuz. The HDFC Bank report noted that, besides oil, the Middle East is a major supplier of natural gas and fertilizer feedstocks. “20% of global Liquefied Natural Gas (LNG) trade passes through the Strait of Hormuz, driven primarily by Qatar,” the report highlighted.
Radhika Rao, Senior Economist at DBS Bank, stated that an increase in crude prices to $90 per barrel could shave off 25 basis points from FY27 GDP growth. If prices surge to $100 per barrel, the drag would be around 40 basis points.
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QuantEco Research has estimated an impact of 60 basis points on GDP growth if crude prices move to $100 per barrel. QuantEco projected FY27 GDP growth at 6.6-6.8% in a pre-war scenario. Following the geopolitical tensions in the Middle East, QuantEco revised its growth projection to 6.4-6.6% if oil prices stay at $90 per barrel and 6-6.2% if prices surge to $100 per barrel.
However, the HDFC Bank report noted that if the conflict were to resolve over the next 10-15 days, the situation could quickly revert to a scenario where oil prices fall back within a range of $60-70 per barrel.
TOPICSGDP growthThis article was first uploaded on March eleven, twenty twenty-six, at twenty-seven minutes past eleven in the night.