Assuming an average crude oil price of $85/bbl in FY2027, ICRA projects the real GDP growth to ease to ~6.5% in the fiscal from 7.5% estimated for FY2026. Favourable developments on the trade front, including the interim deal with the US with a lower tariff rate, improved prospects for domestic investment aided by the robust hike in Central Government capex included in the Union Budget, and the favourable outlook for domestic consumption owing to lower GST rates, cumulative rate cuts of 125 bps by the RBI, subdued food inflation, and upbeat farm sector trends, augur well for the growth outlook. However, the ongoing conflict in West Asia has led to a surge in energy prices and impacted availability, which would hurt corporate profitability and could lead to higher inflation, impacting consumer demand. In nominal terms, the GDP growth (2022-23 base) is projected to improve to ~10.5% in FY2027 from 8.6% estimated for FY2026, amid the expected pickup in WPI and CPI inflation compared to FY2026. A prolonged conflict in West Asia poses downside risks to ICRA’s growth estimate for FY2027, with the extent of downside contingent on the duration of the conflict and consequent implications on energy prices/availability, domestic investment, inflation and external trade.
