India GDP growth FY27: calls cut to 6.6-6.7% as oil spikes

Growth forecasts turn cautious on West Asia energy shock

India’s FY2026-27 growth outlook is being marked down by multiple research houses as the West Asia conflict raises the risk of a prolonged oil and supply shock. BMI, a Fitch Group firm, said India’s economic growth is likely to decelerate to 6.7% in the current fiscal, from 7.7% in FY2025-26. It warned GDP expansion could slow significantly due to waning momentum and the oil price shock from the Iran war. Separately, S&P Global and Crisil’s India Forward report projected FY27 growth at 6.6% from 7.6%, citing persistent energy disruptions feeding into inflation and financial conditions.

BMI’s base case: 6.7% growth, with downside risks

BMI said it maintains its forecast of 6.7% GDP growth during FY2026-27 because it expects the effects of last year’s tax reforms to fade as input costs rise in the new fiscal year. It also noted that the prospect of the Iran-US conflict escalating in scope presents downside risk to its growth outlook. According to BMI, India must balance spending needs on defence and fuel price stabilisation against its fiscal consolidation agenda. The firm added that restricted supply of energy and food in FY2026-27 could slow consumption growth while raising price inflation.

How 2025 tax reforms supported growth, and why the boost may fade

BMI said tax reforms in GST and income tax carried out in 2025 partly offset the effects of cost-push inflation. But it expects that support to dissipate by the April-June quarter of 2026. The report also said looser monetary policy could support capital spending as borrowing costs ease. At the same time, BMI flagged that increased uncertainty amid the war and higher input prices could hurt investment.

Oil price scenarios: what BMI models suggest

A key sensitivity highlighted by BMI is crude oil. It said its models indicate GDP growth will fall by up to 0.4-0.7 percentage points if Brent crude rises to around USD 90 per barrel. BMI also said the conflict in Iran has already curtailed supplies and that disruption has been factored into its 6.7% FY27 estimate. But it cautioned that any further escalation could further offset economic momentum inherited from FY2025-26.

S&P Global-Crisil: 6.6% growth, higher inflation and a weaker rupee

S&P Global and Crisil’s India Forward report warned that India’s GDP growth will slow to 6.6% in FY27 from 7.6%. The report linked the moderation to a West Asia-driven energy shock lifting oil prices, tightening financial conditions and disrupting supply. It projected inflation rising to about 5.1% from an unusually low 2% last year, reflecting second-round effects from higher energy, freight and input costs. It also flagged macro spillovers including a weaker rupee toward 93 per dollar and higher bond yields.

External balances and deficits come into sharper focus

S&P Global and Crisil projected the current account deficit would widen from around 0.8% to roughly 2.2% as energy imports rise and export growth slows. It also said Brent crude is expected to average close to USD 96 per barrel this fiscal year, with elevated levels persisting into the next. The report framed the energy crisis as the central transmission channel affecting India’s economic outlook, with rising import bills and wider deficits threatening momentum even as domestic demand remains relatively strong.

Other forecasts: government band, RBI baseline, and street cuts

The Indian government is maintaining its forecast for the 2026 fiscal year at 6.8%-7.2%, even as market projections have moved lower. Goldman Sachs forecast India’s growth next year at 5.9%, while Oxford Economics projected 6.2%. The Reserve Bank of India, in its monetary policy review earlier this month, projected GDP growth for FY27 at 6.9% compared with 7.6% estimated in FY26. These estimates sit alongside more bearish scenario work from consultancies and brokerages focused on oil price and supply-chain disruptions.

UBS: growth cut to 6.2% with higher inflation risk

UBS Research said India’s economic growth could slow sharply in FY27 as the Middle East conflict triggers a prolonged energy shock, disrupts supply chains and pushes inflation higher. It cut its FY27 GDP growth forecast to 6.2% from 6.7%, assuming the Indian crude basket averages around USD 100 per barrel. UBS outlined two alternate scenarios: a quick de-escalation case with oil easing to around USD 85 per barrel, lifting growth to 6.5%, and a prolonged disruption case with oil surging toward USD 150 per barrel, pulling growth to 5%-5.5%. UBS also raised its FY27 CPI inflation expectation to 5.2% from 4.6%.

EY and CII: oil above USD 100 is a clear growth drag

EY India said India’s GDP growth may slip to about 6% and CPI inflation may increase to 6% if the Indian crude basket averages USD 120 per barrel in FY27. EY added that if international oil prices remain around USD 120 per barrel, India’s GDP growth could fall to the 6% range and inflation could exceed 6%. Separately, CII President Rajiv Memani warned that a prolonged West Asia conflict marked by shipping disruptions and elevated energy prices could pull India’s GDP growth to less than 6.5%. He also said anything above USD 100 per barrel will have an impact on growth.

Key forecasts and assumptions at a glance

Why this matters for markets and households

Higher crude prices typically feed into inflation through fuel, freight and input costs, and multiple reports cited second-round effects across the broader price basket. BMI expects restricted supply of energy and food to slow consumption growth while raising inflation. S&P Global and Crisil highlighted the risk of wider current account and fiscal deficits as import bills rise, alongside pressure on the currency and bond yields. UBS noted that uncertainty and higher input costs can weigh on private investment decisions even if easier policy supports some capital expenditure.

Additional macro risks: weather shocks and momentum indicators

BMI cited International Monetary Fund estimates showing that a typical El Nino shock can shave around 0.1 percentage point off India’s GDP growth. It said this impact could further offset economic momentum inherited from FY2025-26. UBS also pointed to signs that momentum had started moderating in March, noting weakening manufacturing activity, slower core sector growth and a sharp contraction in fertiliser production amid gas shortages and rationing.

Conclusion

India’s FY27 growth narrative is being reshaped by the oil and supply shock linked to the Iran and broader West Asia conflict, with BMI holding 6.7% and S&P Global-Crisil at 6.6% alongside deeper cuts from UBS and scenario warnings from EY. The key swing factors remain crude prices, the duration of supply disruptions, and how inflation and external balances evolve as energy costs feed through the economy. Research houses have also flagged that the growth impulse from the 2025 tax reforms is likely to fade by mid-2026, even as looser monetary conditions may offer partial support. The next set of policy and forecast updates, including evolving assumptions on crude and shipping disruptions, will be central to how markets re-price India’s FY27 trajectory.