How every ₹1 fall against USD and $10 rise in crude can delay India’s GDP goal

India’s economy is likely to have expanded by 7.2% in the January-March quarter of 2025-26 despite mounting global uncertainties, a report by State Bank of India (SBI) said on Monday.

The estimate is marginally lower than the National Statistical Office’s (NSO) advance estimate of 7.3% growth for the fourth quarter, but indicates that economic momentum remained robust despite heightened global uncertainties and geopolitical tensions.

SBI Research also pegged the full-year GDP growth for 2025-26 at 7.5%, slightly below the NSO’s advance estimate of 7.6%.

“Despite global headwinds, the Indian economy has maintained strong growth momentum,” the report said, noting that high-frequency activity data continued to indicate resilient economic activity.

The report said rural consumption remained strong on the back of favourable farm and non-farm activity, while urban demand has seen a steady uptick since the festive season, aided by fiscal stimulus measures.

SBI’s nowcasting model, based on 54 high-frequency indicators across agriculture, industry and services, showed that 85% of tracked indicators were accelerating in the fourth quarter, up from 83% in the previous quarter.

Bank credit growth also provided support to economic activity.

Growth in scheduled commercial bank credit accelerated to 16.1% in FY26 from 11% in FY25, with incremental lending of ₹29.5 lakh crore during the year.

Credit growth remained near 16% as of April 30 and is expected to stay strong in the first half of FY27 before moderating.

FY27 growth seen moderating to 6.6%

SBI Research projected India’s GDP growth at 6.6% in 2026-27, lower than the Reserve Bank of India’s estimate of 6.9%.

Its quarterly projections show GDP growth easing from 6.8% in April-June to 6.5% by the second half of the fiscal year.

The bank said geopolitical tensions, particularly in West Asia, and persistently high oil prices could weigh on economic activity.

Impact of high crude prices and falling rupee

According to the report, every $10 per barrel increase in crude oil prices could widen India’s current account deficit by 35 basis points, push inflation by 35-40 basis points, and shave 20-25 basis points off GDP growth.

“As the oil prices is around $105/barrel (May), the average oil price will be around $100/barrel and India’s GDP is expected to be ~ 6.6% in FY27,” it said.

A sustained rise to $110 per barrel could reduce growth to 6.4%, while $130 oil could drag it down to 6.0%, according to SBI's scenario analysis.

The report also flagged concerns over the rupee's depreciation, saying each 1-rupee fall against the US dollar could reduce India's nominal GDP in dollar terms by 20-25 basis points.

At an exchange rate of ₹95 per dollar, India's economy would be worth about $4.04 trillion in FY27 and the “dream to be $ 5 trillion economy may be achieved in the year FY30”, SBI Research said.