The effect of ongoing tension in West Asia is now visible on India’s economy as well. According to the report of CareEdge Ratings, if crude oil prices remain high for a long time, the country’s economic growth may slow down and inflation may increase. The report warns that the increase in energy costs will increase pressure on the entire economic system.
Growth at $100 drops to 6.5%
According to the report, if the average price of crude oil remains around $ 100 per barrel, then India’s GDP growth may decline to 6.5% in fiscal year 2027. Earlier, when the price of oil was 60-70 dollars per barrel, the growth was estimated at 7.2%. At the level of $90 per barrel, this estimate has already reduced to 6.7%.
If prices increase further, the situation may become more serious. At $110 per barrel, the growth is expected to fall to 6.1%, while at $120 it may go below 6%. It is clear from this that expensive oil can have a direct impact on India’s economic growth.
Pressure on inflation will also increase
Its big impact can be seen not only on growth but also on inflation. According to the report, the inflation estimate at $60-70 per barrel was 4.3%, which may increase to 4.5-4.7% at $90. If oil reaches $100, inflation may go up to 5.1-5.3%.
If the price of oil rises to $110-120 per barrel, inflation may further increase to between 5.8% to 6.6%. This will have a direct impact on the pockets of common people, because petrol, diesel and other essential commodities will become expensive.
Different impacts on different sectors
It has been said in the report that sectors like airlines, petrochemicals, ceramics and glass will be most affected. Costs will increase rapidly in these areas and profits may decrease. At the same time, oil marketing companies, fertilizers, tyres, packaging and basmati rice export sectors will also remain under pressure, although they have the potential to recover to some extent.
Sectors like gas distribution, cement, construction, auto and hospitality will have moderate impact. On the other hand, the impact on sectors like upstream oil-gas, power, pharma and coal is expected to be relatively less.
Domestic demand supported, but risks remain
According to the report, India’s economy still remains strong on the basis of domestic demand. But if crude oil prices remain high and supply disruptions continue, it may affect the growth rate in the future. Expensive oil increases costs, increases inflation and reduces purchasing power of people, which affects overall economic growth.