Higher oil prices may slow down the economic growth by 20-25 bps in FY27, says SBI Research.
SBI economists assessed that there is 5 per cent chance that higher prices may still result in slowing of inward remittances.
India’s personal remittances increased 15 per cent to $138 billion in FY25 from $119 billion in FY24. GCC (Gulf Co-operation Council) countries account for around 38 per cent of the total remittances that India receives, thus oil price dynamics is one of the key determinants to our remittances, the economists said in a report.
“India, the world’s third-largest oil importer and consumer, imports nearly 90 per cent of its crude oil requirements. About two million barrels per day of this, out of 5.5 million, transits through the Strait of Hormuz, which the US Energy Information Administration has described as the “world’s most important oil transit chokepoint”.
“In 2025 H1, oil flow through the strait averaged 20.9 million barrels per day (b/d), or the equivalent of about 26 per cent of global petroleum liquids consumption,” said Soumya Kanti Ghosh, Group Chief Economic Advisor, SBI.
SBI economists noted that over the years, India has strategically shifted to import oil from more than 40 countries, more from Russia since 2022. Though India does not buy any oil from Iran, Hormuz is crucial for India as 40 per cent of oil imports still pass through this waterway between Iran and Oman.
They noted that the forward contracts booked for future delivery of oil will partially be offset by US’ reprieve on purchase of Russian oil through a 30 days window.
SBI economists noted that their regression results indicate that for every $10 per barrel (bbl) increase in crude oil prices, the CAD may widen by 36 basis points (bps) in FY27. They assessed that the rise in oil price could lead to the cost-push inflation to the economy – every $10 increase in the oil price may lead to 35-40 bps rise in inflation.
Further, higher oil prices may slow down the economic growth by 20-25 bps in FY27. As oil prices increase from $90 to $130 per bbl, the current account deficit widens, inflation rises and GDP growth declines.
In worst case scenario (if oil prices reach $130 per bbl), SBI Research expects GDP growth to plummet to 6 per cent (on the assumption of 7 per cent growth in FY27).
SBI Research said prolonged war could impact exports to GCC countries even as it underscored that banks and non-finance private sector have major exposures to affected region.
Published on March 7, 2026