India’s GDP growth may slip to 6% if crude averages $120 a barrel: EY

India’s Gross Domestic Product (GDP) growth may slip to around 6 per cent in the current fiscal, while retail inflation could rise to the Reserve Bank of India’s (RBI) upper tolerance band of 6 per cent, if the Indian crude basket averages $120 per barrel, EY said.

Notably, the April 2026 release of the US Energy Information Administration’s (EIA) Short-Term Energy Outlook projects Brent crude oil prices to rise from an average of $81 per barrel in Q1 2026 to a peak of $115 per barrel in Q2 2026. However, depending on how the crisis evolves, crude prices may decline thereafter.

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EY India Chief Policy Advisor D.K. Srivastava said that although there is limited room for policy intervention, policymakers may need to consider an upward revision in the repo rate and accelerate diversification of crude supply sources, as the price of the Indian crude basket (ICB) could rise further if the West Asian crisis persists.

“If the ICB price averages $120 per barrel in FY27, India’s real GDP growth may slip to about 6 per cent and CPI inflation may increase to 6 per cent. To minimise the adverse impact on the fiscal deficit, higher energy prices should be passed on to consumers to a relatively larger extent,” Srivastava said.

He added that current indications suggest the West Asian crisis may last longer than initially expected. Even after it is resolved, it may take considerable time for global crude supply conditions to normalise.

“As such, India’s growth may fall below 6.5 per cent, while inflation could be somewhat higher than the RBI’s baseline projections,” he said, adding that there is a likelihood of the ICB price exceeding $95 per barrel on average in FY27.

“Even so, India’s growth in FY27 is expected to be more than double the global growth rate under an adverse scenario,” Srivastava noted.

Earlier, the International Monetary Fund (IMF) projected India’s GDP growth at 6.5 per cent for FY27, while the Asian Development Bank (ADB) and the World Bank expect it to be 6.9 per cent and 6.6 per cent, respectively.

In its monetary policy review earlier this month, the RBI projected GDP growth for FY27 at 6.9 per cent.