India likely to grow at 6.3% if oil price averages $130/barrel in FY27: S&P

Amid the West Asia crisis, S&P Global Ratings has stated that India is likely to grow at 6.3% if oil prices average $130 per barrel in the current fiscal year (FY27). Citing the country’s long-term political commitment to fiscal consolidation, it noted that the fiscal strain caused by higher energy prices is unlikely to affect India’s sovereign credit rating.

Yee Farn Phua, Director of Sovereign and International Public Finance Ratings at S&P, said that under a baseline assumption of crude oil at $85/barrel, India’s growth is projected at 7.1% in FY27. He added that this remains a very strong figure compared to other major economies. Even in an alternative scenario where oil averages $130/barrel, growth is still expected to be around 6.3%, which would likely remain the highest among major economies.

The rating agency warned that disruptions to energy supplies - leading to fuel rationing or shortages of related products such as fertilisers - pose a significant risk. It noted that India could face a weaker current account balance, rising input costs that squeeze producer margins, higher consumer prices that erode purchasing power, and fiscal pressures as the government steps in to shield consumers from the impact.

Phua said ‘The government's fiscal consolidation efforts continue to be very strong... India has a lot of physical flexibility on the spending side, especially on infrastructure. So, in case some of the areas where they have to spend more, for example, the subsidy bill, they might cut in other places to make sure that they will still hit the fiscal deficit target’.