Key facts
- India's GDP growth in 2026/27 faces risks from rising oil prices due to Middle East tensions and a weakened monsoon.
- The IMF cut India's GDP growth forecast for 2026/27 to 6.4%.
- India imports almost 80% of its oil needs, making it vulnerable to energy shocks.
- Global crude prices stood above $90 a barrel last week on fears of disruption in the Strait of Hormuz.
- The IMF will reassess India's national accounts quality later this year.
India's economic growth in the 2026/27 fiscal year faces significant downside risks stemming from escalating Middle East tensions that are driving up oil prices, and a potentially weak monsoon due to the El Nino weather effect, according to an International Monetary Fund official. Asia's third-largest economy imports nearly 80% of its oil needs, making it susceptible to energy shocks that could negatively impact growth and fuel inflation.
The IMF recently lowered India's GDP growth forecast for 2026/27 by 10 basis points to 6.4%, while simultaneously increasing its forecast for 2027/28 by 20 basis points to 6.7%. Ranil Salgado, the IMF's senior resident representative for India and Bhutan, highlighted these dual risks in a recent interview.
Global crude oil prices had surpassed $90 a barrel last week amid concerns about potential disruptions in the Strait of Hormuz. Although prices eased slightly in the preceding two days due to reports of U.S.-Iran mediation efforts, fresh attacks and threats from Houthi rebels to blockade Saudi Arabia continue to pose a threat to supply stability.
Salgado also noted that the IMF's projections did not fully incorporate the impact of a potentially poor monsoon this year, which is an El Nino year. While there was a delayed monsoon with some recovery in July, the full extent of its impact remains to be seen.
Furthermore, the IMF plans to reassess the quality of India's national accounts statistics later this year. This reassessment will follow the release of a back series based on the revised 2022/23 GDP base year by India's statistics department, expected towards the end of 2026. The IMF had previously assigned India's national accounts statistics a 'C' rating due to methodological weaknesses, including an outdated base year and reliance on wholesale price indices for deflation. India has since taken steps to address these concerns, including updating the base year and improving data collection methods.