ADB Economist Warns Sustained High Oil Prices to Cut India's FY27 Growth by 0.6%

Prolonged Middle East tensions are expected to keep global oil prices elevated through 2027, with significant implications for India's economy, Asian Development Bank Chief Economist Albert Park said in an interview with PTI. He projected oil prices to average USD 96 per barrel in 2026 and USD 80 in 2027, creating sustained inflationary pressure and reducing India's GDP growth by 0.6 percentage points in FY27 to 6.3%.

Park attributed the forecast to supply constraints and risk premiums reflected in spot and futures markets, noting India's high dependence on imported oil and gas. Inflation in India could rise to 6.9% this year, up from the earlier 4.5% estimate, due to pass-through effects from higher energy costs. The ADB had previously projected India's growth at 6.9% for this fiscal and 7.3% for the next.

The ADB downgraded its 2026 growth forecast for the Asia-Pacific region to 4.7% from 5.1% on April 29, citing extended disruptions in West Asia. Park also highlighted risks from potential El Nio conditions and rising fertilizer prices, which could reduce crop yields and affect global food markets, particularly rice, where India is a major exporter.

The ADB will release its next economic outlook update in October, which will include revised growth and inflation projections for India and the region based on evolving geopolitical and climatic conditions.