New Delhi: The ‘EY Economy Watch’ report for April has said that it expects global crude oil prices to range between USD 60-65/bbl in FY26 as opposed to the FY25 average of USD 77/bbl, to India’s advantage. The report said that a fall in crude prices is likely to be both growth-supportive and inflation-dampening in India’s context. “Our assessment is that with suitable macro policies, India may be able to sustain a real GDP growth at about 6.5 percent in FY26 as also in the medium term, while maintaining a CPI inflation below 4 percent,” said EY India Chief Policy Advisor DK Srivastava.
“The US has been working on a joint strategy of reducing energy prices by increasing production of oil and gas. It is issuing new licenses and existing facilities are increasing their capacities so that the overall global supply of petroleum crude and natural gas can effectively increase. The expectation is that this may lower costs of production across the board and neutralise any inflationary effects of reduced imports into the US. As global crude prices fall, India is likely to benefit immensely,” said the latest report.
This fall is expected in view of the ongoing US-China tariff retaliations and the across-the-board 10 percent hike of tariff levied on imported goods into the US, except for China and some other countries. As per an earlier RBI study15, a fall of USD 10/bbl in crude prices, compared to a benchmark of USD 75/bbl, is likely to increase India’s GDP growth by about 30 basis points and reduce CPI inflation by about 40 basis points. Although a slowdown in global growth and continued trade and tariff uncertainties may marginally dampen growth in India, this may be adequately neutralised by a fall in global crude prices and appropriate fiscal and monetary policies to support a real GDP growth of at least 6.5 percent and a CPI inflation rate of 4 percent or less in FY26, said EY in its report.
“As a short-term measure, India may attempt to reduce its reciprocal tariff rate as determined by the US, by switching its supply sources of crude oil from other countries to the US. For example, with an increase of USD 25 billion of imports from the US, possibly on account of increased crude oil imports, India’s reciprocal tariff rate is estimated to go down to 11.8 percent as shown below,” said the report.
