Crude beyond current levels to impact India's GDP estimates, says Icra

Mint

6 hours ago

New Delhi: Oil is likely to average around $70-80 a barrel in FY26, and a sustained rise from the current levels risks a reduction in India's growth forecasts, according to Icra Ratings Ltd.
"If crude oil prices persist at the current levels, it may not lead to a material revision in our GDP growth forecast, which is currently pegged at 6.2% for FY2026,' the rating firm said on Friday. 'However, a sustained increase from the current levels would weigh on India Inc.'s profitability and portend a downward revision in our GDP growth forecast for the fiscal."
Brent has crossed $77 a barrel as prices spiked over 10% in the past week, as the Israel-Iran conflict intensified. At 6.50 pm on Thursday, the August contract on the Intercontinental Exchange was trading at $77.58, 1.15% higher than the previous close.
On Wednesday, Icra marginally lowered India's FY26 GDP growth rate to 6.2% from 6.5% in FY25.
A sustained flare-up in the conflict poses upside risks for estimates of crude oil prices, and India's net oil imports and the current account deficit, it said. 'A $10/bbl increase in the average price of crude oil for the fiscal will typically push up net oil imports by ~$13-14 billion during the year, enlarging the CAD (current account deficit) by 0.3% of GDP.'
India is a net importer of oil, and it meets over 85% of its energy requirement through imports. At present, Icra expects the CAD to remain at 1.2-1.3% of GDP in FY2026.
Since 13 June 2025, as conflict started between Israel and Iran, crude prices have surged to $74-75 a barrel from $64-65 a barrel.
The conflict has sparked concerns of Iran blocking transport of energy supplies through the Strait of Hormuz, one of the key energy choke points through which almost 20% of global liquids and liquified natural gas (LNG) is traded. Any escalation in the geopolitical situation could significantly impact global energy supplies and prices.
Iran's crude oil production is around 3.3 million barrels per day, of which it exports 1.8-2.0 million barrels a day. While Iranian oil and gas facilities have reportedly been attacked, the extent of damage is not clear, Icra said. However, any disruption of Iranian production and supplies or a wider regional conflict impacting other large producers in the region could push energy prices higher, it said.
Crude shipped from Iraq, Saudi Arabia, Kuwait and the UAE, which pass through the Strait of Hormuz, account for 45-50% of total crude imports by India. About 60% of the natural gas imports by India pass through this strait.
Icra said "at these elevated crude oil prices, while the profitability of upstream players will remain healthy and their capex plans will remain intact, the marketing margins of downstream players will be impacted along with the expansion of LPG under-recoveries".
It also said the change in crude oil prices is likely to translate faster into higher wholesale inflation and consumer inflation. For every 10% increase in crude oil prices, wholesale inflation will rise by 80-100 basis points, compared to 20-30 basis points in consumer inflation, provided the transmission into the retail selling price of petrol and diesel.
Mint reported earlier that it is unlikely that the public sector oil marketing companies would transfer the higher cost to the consumers in the near future, given that there has been no downward revision, too, in the past year despite a fall in global prices.