Rising Oil Prices Could Elevate India’s Inflation to 4.8%
India’s inflation rate may increase to 4.8% in the fiscal year 2027 if oil prices average around $90 per barrel, according to a recent report by Indian wealth and asset manager 360 ONE Capital. The report highlights the significant impact of sustained high crude oil prices on inflation and economic growth in the country.
The analysis assumes a scenario where tensions de-escalate by mid-June, with crude oil prices remaining elevated at $90 per barrel throughout FY27, which runs until March 2027. Under these conditions, consumer price inflation is expected to rise substantially, while the country’s GDP growth rate is forecast to slow to 6.3%, down from the previously expected 6.7%.
Moreover, the report warns that if oil prices increase by an additional $10 per barrel beyond the $90 baseline, inflation could surge to 5.6%. This would be due in part to a partial pass-through of approximately 5% to retail fuel prices. Such a spike would also suppress GDP growth further to about 5.9%, widen the current account deficit to 2.5% of GDP, and increase the fiscal deficit to 4.8% of GDP.
As the world’s third-largest crude oil importer, India is particularly vulnerable to fluctuations in global oil markets. The recent escalation in global oil and gas prices has already begun to influence consumer prices, accelerating inflationary pressures. Despite these challenges, the Reserve Bank of India (RBI) recently noted that the economy remains resilient to external shocks but cautioned that the surge in oil prices poses near-term risks to economic growth and could push inflation upwards.
In its Annual Report for 2025-26, the RBI projected India’s real GDP growth at 6.9% for 2026-27 but stressed that risks remain tilted to the downside. During the 2025-26 fiscal year, India maintained its position as the world’s fastest-growing major economy, expanding at 7.6%, with headline inflation recorded at 2.1%.
The RBI further pointed to multiple factors that could intensify inflationary pressures, including renewed geopolitical tensions that spike global fuel and commodity prices, increased input and wage costs, and currency exchange rate volatility. Taking these into account, the central bank projected consumer price inflation (CPI) for 2026-27 at 4.6%, signaling careful monitoring of economic conditions moving forward.
The persistent rise in oil prices amid ongoing global supply disruptions underscores the challenges India faces in balancing growth aspirations with inflation control measures. Policymakers will need to remain vigilant and possibly adjust economic strategies to mitigate the inflationary consequences of expensive energy imports, while fostering sustainable GDP growth.