India’s economy shows strong resilience. It can likely handle average crude oil prices around $90 per barrel in FY27. However, prices that stay above this level may pressure growth, inflation, and external balances.
Avendus Wealth shared this view in its latest note. The firm stated that India’s macro fundamentals look solid. As a result, the economy can sustain Brent prices near $90 per barrel next year. Yet a prolonged rise beyond that point could create challenges.
India depends heavily on the Strait of Hormuz for energy imports. Nearly 47 percent of its crude oil, 61 percent of LPG, and 29 percent of LNG pass through this route. This exposure adds direct risk to macroeconomic stability.
Analysts point to clear impacts from higher prices. For instance, every $10 increase in crude oil can widen India’s current account deficit by about $18 billion. This rise equals roughly 0.41 percent of GDP. In addition, such a jump may reduce FY27 GDP growth by 30 to 35 basis points.
Higher energy costs also fuel inflation. According to estimates from Emkay, Spark, and Kotak, consumer inflation could climb toward or even cross the Reserve Bank of India’s comfort zone if prices remain high for long.
Moreover, any closure of the Strait of Hormuz would hit global oil markets hard. Since nearly one-fifth of world crude supply travels through it, major disruptions could drive prices much higher.
Despite these risks, India stands on firm ground. The country enters this uncertain phase with solid buffers. System liquidity remains comfortable at around Rs 5.1 lakh crore. Foreign exchange reserves cover about 11 months of imports. Government capital expenditure continues to support the economy.
Furthermore, Indian companies have stronger balance sheets than in past cycles. Years of deleveraging and better cash flows have strengthened them. Therefore, firms can better absorb short-term shocks.
“While elevated energy prices may pressure margins in the near term, the improved financial position of Indian corporates preserves their ability to sustain capex and resume growth once conditions normalize,” the Avendus note added.
Overall, these strengths position India well to manage oil price volatility.