India’s consumption-driven economy has the capacity to grow at over 7% annually even if crude oil prices remain elevated in the $90–100 per barrel range, industry body Assocham said, underscoring the country’s improving resilience to energy shocks. However, rising global crude prices are beginning to strain domestic fuel economics, with a sharp increase in petrol and diesel prices likely after ongoing elections.
According to Assocham, India has historically demonstrated the ability to withstand high oil price environments without derailing growth. An analysis of data from 2000–01 to 2025–26 shows that several of India’s strongest growth phases coincided with moderate to high crude prices. For instance, the economy expanded by 7.6% in 2022–23 when oil prices averaged $93 per barrel, and by 7.2% in 2023–24 with crude at $82 per barrel.
Even during the 2011–14 period, when oil prices exceeded $100 per barrel, India recorded GDP growth in the range of 5.2% to 6.4%. In contrast, the sharpest contraction of (-) 5.78% occurred in 2020–21 when oil prices were at multi-year lows, highlighting that external shocks like the pandemic, rather than energy prices alone, have had a more pronounced impact on growth.
Assocham President Nirmal Kumar Minda attributed this resilience to India’s strong consumption base, which drives demand, supports industrial expansion, and creates a virtuous cycle of income and employment growth. He added that the economy is likely to maintain growth above 7% in 2026–27, supported by steady exports, robust domestic demand, and rising capital expenditure.
Official estimates also remain optimistic. The government’s first advance estimates peg GDP growth at 7.4% for the current fiscal, reinforcing India’s position as the fastest-growing major economy despite geopolitical tensions and trade disruptions.
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However, global agencies have struck a more cautious note. Moody’s has trimmed India’s growth forecast to 6%, citing inflationary pressures from geopolitical conflicts, while the OECD expects growth to moderate to 6.1%. Domestic rating agency ICRA has projected growth at 6.5% for FY27, pointing to risks from elevated energy prices and supply uncertainties.
Rising crude oil prices
Meanwhile, rising crude oil prices are beginning to create stress in India’s fuel pricing dynamics. Brokerage firm Kotak Institutional Equities has warned that petrol and diesel prices may need to rise by ₹25–28 per litre to reflect higher input costs. Crude markets remain volatile due to supply disruptions in the Strait of Hormuz amid escalating tensions in West Asia.
India’s crude import bill has surged despite a 13–15% drop in import volumes, increasing by an estimated $190–210 million per day. Retail fuel prices, however, have remained unchanged, leading to mounting losses for refiners — estimated at around ₹270 billion per month.
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Kotak noted that while the case for a fuel price hike is strong, the timing is likely to be influenced by political considerations, with any revision expected after elections conclude. Despite government measures such as excise duty cuts and windfall taxes, the relief has been partial.
With global oil volatility persisting, India appears capable of sustaining economic growth, but the pressure on fuel prices suggests a near-term inflation risk that policymakers will need to carefully manage.
(With PTI inputs)
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