India’s strong macroeconomic and financial foundation can be helpful in reducing the impact of frequent fluctuations in crude oil prices. However, if the average price of crude oil remains $130 per barrel in 2026, then the economic growth rate may decline by up to 0.80 percent. Under this scenario, companies’ earnings before interest, taxes, depreciation and amortization of trademarks, patents and other assets may decline by 15-25 percent in FY 2026-27. Due to this, the debt is expected to increase by 0.5 times to one times. At the same time, the quality of assets of the banking sector may weaken, due to which the NPA (non-performing asset) may reach about 3.5 percent.
How much can the price of crude remain?
S&P Global Ratings said in a report that India is not untouched by the shocks caused by the war in West Asia. The problem of high energy prices and disruption in supply may persist for several months, which will affect economic activities in all sectors. However, the strong balance sheets of companies, good capital in banks and strong external position will provide protection from this impact. S&P Global Ratings has estimated the price of Brent crude to be $ 130 per barrel in 2026 and $ 100 per barrel in 2027 in a stressful situation, while on a comparative basis the price is $ 85 and $ 70 respectively.
Pressure can be seen here
The agency does not expect any immediate impact on India’s rating. However, strong efforts on the fiscal front may face a temporary setback. Current account deficit may increase due to high oil prices. According to estimates, an increase of $ 10 per barrel can increase this deficit to about 0.4 percent of GDP. There may also be pressure on the rupee exchange rate due to risk aversion sentiment and rising import bill. The agency has warned that the impact of the energy crisis will be manifested in the form of higher raw material costs, declining corporate margins, rising consumer prices and increasing fiscal pressure if the government intervenes in subsidy matters. Growth could also be impacted by potential supply disruptions affecting fuels and petrochemicals.
Economy will remain strong
Despite these risks, India’s economy heads into 2026 with strong growth, good domestic demand and low inflation. This should help in absorbing the shocks that may come in the near future. S&P said strong domestic fundamentals, potential government support and significant improvements in corporate and banking sector conditions over the past few years would help cushion any shocks. However, sectors like chemicals, refining and aviation are the most affected. But infrastructure and people-centric sectors are expected to remain relatively stable. The decline in corporate loans over the last few years and the better condition of banks are also believed to be helpful in limiting systemic stress.
India capable of facing challenges
Indian banks are well placed to absorb shocks with strong capital reserves and low non-performing assets. However, there may be a slight increase in loan cost and there may be pressure on profits in the financial year 2026-27. Overall, S&P Global Ratings said India could face higher oil prices and supply disruptions for a few months. However, a prolonged shock would pose wider risks to growth, fiscal stability and external balance. The rating agency said that India is capable of bearing pressure to some extent. Companies’ strong balance sheets provide a cushion against rising energy prices. At the same time, the capital position and profit of banks is also strong.
