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Informist, Thursday, Apr. 16, 2026

 

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--S&P: Expect consumer prices to rise in India once energy shock sets in
--S&P: Don't see additional fiscal strain on India rtg from oil price shock
--S&P: Supply disruptions may hit credit quality of Indian companies
--CONTEXT: Comments by S&P Global Ratings' analysts in a webinar
--S&P:India FY27 fiscal deficit aim challenging if fertiliser subsidies jump
--S&P: India's robust external position can absorb a wider CAD in FY27
--S&P: Expect sharp rebound in earnings and leverage in FY28 in India
--S&P: Chemicals, refining, airlines most exposed sectors to oil price shock
--S&P: Rated Indian cos can manage credit impact from oil price shock for now
--S&P: Oil price shock may hit Indian banks via asset quality challenges
--S&P: Credit losses of Indian banks may rise from oil price shock
--S&P: India's fiscal consolidation efforts to remain strong in long term
--S&P: Expect corporate credit quality in India to remain stable
--S&P: Rupee may fall to 97/$1 if crude oil prices average $130/bbl
--S&P: Banks may turn cautious on giving loans to sectors hit by oil shock
--S&P: Credit offtake may decline in India due to oil price shock

 

NEW DELHI – India will see additional fiscal stress in 2026-27 (Apr-Mar) owing to the energy supply constraints and price shock due to the war in West Asia, S&P Global Ratings said Thursday. However, it does not expect the added fiscal strains to affect its credit rating of BBB on India.

 

High energy prices will translate to a wider current account deficit, increased consumer prices, and higher costs for producers in India, analysts at S&P Global said in a webinar. "Supply disruptions could cause a material weakening in credit quality, impact of just higher energy prices more manageable," analysts at the rating agency said.

 

The government's expenses could increase significantly this financial year, posing challenges in meeting the Budget's fiscal deficit target of 4.3% of GDP for FY27. This will mainly be due to the ballooning of fertiliser subsidies in the wake of the current geopolitical situation, the rating agency said.

 

While the fiscal deficit target for FY27 was set at 4.3% of GDP in the Union Budget, the deficit is now pegged at 4.5% of GDP based on the downward revision in India's nominal GDP as per the new GDP series. Even if the Indian government misses the fiscal deficit target this year, the fiscal consolidation efforts will remain strong in the long term, S&P said.

 

India's current account deficit may widen in FY27, but a robust external position can absorb its impact, S&P said. The rating agency expects the rupee to fall to 97 a dollar if crude oil prices average $130 per barrel. Since the war in West Asia began on Feb. 28, Brent crude oil prices have risen to as high as $119 per barrel.

 

"...in the severe shock on top of the current moderate shock, it should put currency in 104 rupee mark (against a dollar)," said Vishrut Rana, Asia-Pacific senior economist at S&P, based on the back-of-the-envelope calculations in case crude oil prices jump to $200 per barrel.

 

As per S&P's base case, Brent crude oil prices are likely to average $85 per barrel in FY27, $70 per barrel in FY28, and $65 per barrel in FY29. In the base case, S&P has projected India's GDP growth to rise 7.1% in FY27, 7.2% in FY28, and 7.0% in FY29. If oil prices average $130 per barrel, India's growth will be 6.3% in FY27, the rating agency said. It has also projected India's growth at 6.6% in FY28, if oil prices average $100 per barrel.

 

Once the higher energy price shock sets in, the price impact will be seen at the consumer level, the rating agency said. In the base case, S&P has forecast India's CPI inflation to average 4.3% in FY27, 4.5% in FY28, and 4.3% in FY29. CPI inflation averaged 2.1% in FY26. In the oil price shock scenario, S&P expects the CPI inflation to jump to 5.6% in FY27 and then moderate to 5.4% in FY28 and to 4.5% in FY29.

 

SECTOR IMPACT

Sectors such as chemicals, refining, airlines, and cement are exposed the most to the impact of higher oil prices and supply disruptions, the rating agency said. The brunt of the supply disruption can also be seen in the credit quality of Indian companies.

 

But S&P expects corporate credit quality to remain stable in India and said rated Indian companies can manage credit quality from the impact of the energy shock for now. In fact, the rating agency sees a sharp rebound in the earnings of Indian companies in FY28.

 

For the banking sector, the rating agency said system resilience has been steady amid economic growth and is "equipped to tolerate black swans." Amid the current geopolitical scenario, banks may turn cautious about giving loans to sectors hit by high energy prices, S&P said. Thus, credit growth may slow down in India, the rating agency said.

 

Global oil supply constraints will also bring challenges to the asset quality of banks in India, S&P said. The impact of high oil prices may flow into the bank's credit system in India with a rise in credit losses.  End

 

US$1 = INR 93.21

 

Reported by Shweta and Shubham Rana

Edited by Ashish Shirke

 

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