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Informist, Monday, Apr. 6, 2026

 

MUMBAI – Standard Chartered Bank has lowered its forecast for India's GDP growth and raised its projection for inflation in the country on expectations that oil prices are likely to stay high amid the ongoing war in West Asia. Economists at the bank also see risks of fiscal slippage by the central government. 

 

The bank lowered its GDP growth forecast for the current financial year by 60 basis points to 6.4%. It sees CPI inflation averaging 4.7% in FY27, 60 bps higher than previously expected. Economic activity is likely to be impacted by reduced purchasing power, a wider current account deficit, and the adverse impact of lower supply of critical inputs such as cooking gas on manufacturing and services sector activity, Standard Chartered economists Anubhuti Sahay and Saurav Anand said in a report.

 

Standard Chartered is the latest institution to lower its growth forecast for the Indian economy because of the war in West Asia, which has pushed crude oil prices to over $100 a barrel. The Indian economy expanded 7.8% in the December quarter, based on the new GDP series with FY23 as the base year. The government's second advance estimate has projected FY26 GDP growth at 7.6%.

 

"While the increase in energy prices in India has been relatively limited so far (only cooking gas and aviation turbine fuel prices have been revised higher), we build in a 5% increase in retail fuel prices in both May and June 2026 before a partial rollback in Q3-FY27 (Oct-Dec) assuming some reduction in global crude oil prices then," the report said. "Reduced supply of cooking gas is already impacting medium and small enterprises." 

 

Sahay and Anand expect the Reserve Bank of India's Monetary Policy Committee to keep interest rates on hold as a rise in inflation is likely to remain well within the central bank's tolerance band of 2-6%. "However, we acknowledge the risk of a 25-50 bps increase in the repo rate if a sustained rise in energy prices (crude oil prices above USD 100/bbl) pushes global rates higher, putting further pressure on the Indian rupee (INR)." Standard Chartered sees crude oil prices averaging $90-$95 per bbl in FY27.

 

A continued US-Israel war on Iran will put pressure on the government's finances, the report said, adding that risk of a wider-than-targeted fiscal deficit has increased. Sahay and Anand see a risk of slippage of 0.7-0.9% of GDP. 

 

While the Budget pegged FY27 fiscal deficit at 4.3% of GDP, the government now sees it at 4.5% of GDP based on the downward revision in India's nominal GDP as per the new series. Finance Minister Nirmala Sitharaman last month said the government will manage its fiscal deficit for the upcoming financial year despite foregoing revenue from the cut in excise duty on petrol and diesel.  End

 

US$1 = INR 93.06

 

Reported by Shubham Rana

Edited by Akul Nishant Akhoury

 

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