4 min readNew DelhiUpdated: Mar 17, 2026 10:09 PM IST
The macroeconomic impact on the Indian economy of global crude oil prices of up to $90 per barrel is “almost insignificant or not relevant”, Chief Economic Advisor (CEA) V Anantha Nageswaran told the Standing Committee on Finance on March 2. However, should prices rise to $130/bbl and stay there for 2-3 quarters, then headline retail inflation in 2026-27 could jump to 5.5% and GDP growth could fall to 6.4%.
As per the Standing Committee’s report on the Demands for Grants for 2026-27 of the Ministry of Finance (Departments of Economic Affairs, Expenditure, Public Enterprises and Investment & Public Asset Management), tabled in Parliament on Tuesday, the CEA was quizzed earlier this month on how the government planned to mitigate the “triple whammy” of rising crude oil prices, market volatility, and maritime delays caused by the conflict in West Asia.
“We tried to simulate the effect on the macroeconomy on various parameters for three different oil prices: 90 dollars, 110 dollars and 130 dollars per barrel. Of course, the ultimate impact will depend on how long these prices remain relevant. If the shock is short-lived and temporary, then even if it escalates to 130 dollar, it will not matter,” the government’s top economist told the committee, as per the report. He added that the scenario analysis suggested that up to a crude oil price of $90/barrel, the macroeconomic assumptions for 2026-27 of GDP growth of 7-7.4%, inflation at or around 2%, a current account deficit of 1-1.2%, and a fiscal deficit of around 4.3-4.4% “will be feasible”.
However, if global oil prices rise to $130/bbl and stay there for 2-3 quarters, then Consumer Price Index (CPI) inflation could rise to 5.5%, GDP growth could fall to 6.4%, the current account deficit will rise to around 3.2% of GDP, and the fiscal deficit may rise to 5.6%. Nageswaran told the committee that the analysis will be fine-tuned and the results shared as more data is available and clarity emerges about the war’s objectives and the impact on oil prices.
Despite retreating from around $120/bbl, global crude oil prices remain highly volatile and elevated, with the price of the most actively traded May 2026 futures contract moving in the range of $93-98/bbl on Tuesday on the CME Group’s Comex exchange. Meanwhile, the average price of India’s crude oil basket so far in March is $108.23/bbl, up 57% from February, according to data from the Ministry of Petroleum and Natural Gas’ Petroleum Planning & Analysis Cell.
While the pump price of petrol and diesel has not risen in India, the gas shortage has forced the government to prioritise certain sectors and hike the price of household cooking gas by Rs 60 per cylinder, among other measures. Economists expect the cooking gas price hike by itself to push up CPI inflation in March by 12-13 basis points (bps). On the growth front, while the Reserve Bank of India (RBI) has forecast GDP growth (as per the old series) at 6.9-7% in the first two quarters of 2026-27, with risks “evenly balanced”, economists have warned of sizable downside risks should oil prices remain elevated at levels of around $100/bbl in 2026-27.
Commenting on the size of the economy, Nageswaran said re-estimation of the GDP as per the statistics ministry’s new data series and the rupee’s fall meant India is now a $3.9 trillion economy, the same as was estimated last year under the old series. As such, becoming the fourth-largest economy in 2026-27 “is not going to be easy” and India will still be the fifth-largest economy next fiscal.
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“However, in 2027-2028, we may have a chance to become the fourth largest, as much will depend on the Yen exchange rate as to how we are able to overtake Japan,” Nageswaran said.
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