The growth projections assume average crude oil price at USD 85/bbl in 2026-27 fiscal year. It expects India’s current account deficit (CAD) to widen sharply to 1.7 per cent of GDP in FY27 (from 1 per cent in current fiscal year).
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ICRA said the upside risks to inflation stemming from the ongoing global energy supply disruptions amid the West Asia conflict could feed into inflationary expectations of households. This, along with heightened uncertainty is likely to sour consumer sentiments in the near term.
While trends in high frequency indicators for January-February 2026 appear favourable, the heightened uncertainty around the duration of the West Asia conflict casts a shadow on the near-term macroeconomic outlook for countries like India amid high import dependency for items such as crude oil, natural gas and fertilisers.
If the conflict lasts for an extended period, the adverse implications of the same could widen across sectors, amid an uptick in input costs and the consequent impact on profitability of India Inc, ICRA said.
Also Read | FinMin flags growth risks for India as Middle East war ups energy costs“India’s GDP growth is expected to moderate to 6.5 per cent in FY27 from the projected 7.5 per cent in FY26, owing to the adverse impact of elevated energy prices and concerns around energy availability, even as developments around tariffs, lower GST rates, policy rate cuts, subdued food inflation, and upbeat farm sector trends augur well for consumption,” ICRA added.
Amid the projected uptrend in the CPI inflation in FY27 (with risks tilted to the upside), ICRA expects an extended pause on the policy rates by the Monetary Policy Committee (MPC) through the fiscal year, despite the anticipated softening in the GDP growth. However, the RBI may continue to intervene on the liquidity front during FY27, it said.