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Informist, Monday, Apr. 13, 2026

MUMBAI – India's inflation is the most sensitive to a rise in crude oil prices, while its GDP is the second-most exposed in the Asia-Pacific region, Fitch Group unit BMI said in a report Friday. As the West Asia crisis intensifies, India's GDP growth may fall by 1.3 percentage points in the worst-case projection with crude oil at $110 a barrel, while CPI inflation is likely to rise nearly 250 basis points.

Crude oil price at $85 per barrel will hurt India's growth by 35 bps with inflation rising 62 bps, as per the report. If crude oil averages $95 per barrel, India's growth will fall by 72 bps and inflation will rise by 138 bps as the terms of trade and current account worsen with an escalation in hostilities in West Asia. 

"India's -1.3pp growth impact combined with a +2.5pp inflation shock presents the Reserve Bank of India with a stagflationary dilemma harder to navigate than the relatively contained inflation environment that allowed the ECB (European Central Bank) to look through the equivalent shock in Europe," the report said. India's growth will also be worse hit than China's 50-bp impact as its strategic petroleum reserves are thin, BMI said.

The RBI projects India's GDP growth at 6.9% for 2026-27 (Apr-Mar) with downside risks and CPI inflation at 4.6% with upside risks. The BMI report tracked the intensity of the impact of the war on India's economic indicators but did not give a precise range on whether the projections for crude oil, growth and inflation were for the calendar or financial year.

The study takes into account three different average price scenarios for the rise in Brent crude oil prices as the intensity of the conflict between the US and Iran changes. The lowest projection is for if the current two-week ceasefire between the parties holds and leads to an interim agreement, with the worst-case situation that the Strait of Hormuz is shut for six to eight months and further destruction to the region's oil and energy production.

The US Navy will block the Strait of Hormuz starting 1930 IST Monday, it said, for ships sailing to and from Iran after talks with Tehran over the weekend failed to end the West Asia war. Following this, Brent crude futures for June delivery were around $102 per barrel, up 7% from Friday's settlement and above the crucial $100 a barrel mark. Near-month crude futures peaked at $119.50 a barrel at the height of the war in March.

Asia-Pacific is the worst hit region from the conflict as major economies, including India, import over half of the energy needs from West Asia, the report said. With prices of crude oil and petroleum products both surging, the rise in inflation will be distributed largely across the industrial economy rather than only in households, as is the case with Europe.  End

US$1 = INR 93.34

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Janwee Prajapati

Edited by Deepshikha Bhardwaj

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