Impact of Rising Crude Oil Prices on India's Economic Growth

India's economic growth is facing significant challenges due to the surge in crude oil prices following the Iran conflict. Analysts predict that this will adversely affect corporate earnings in FY27, with JP Morgan revising down its growth estimates. The ongoing geopolitical tensions are expected to disrupt supply chains and elevate costs, impacting various sectors including automotive and oil. Despite these challenges, India's revenue growth remains strong, although the dynamics are shifting from volume-driven to price-led growth. Foreign portfolio investors have also begun to exit the Indian market, raising concerns about future economic stability. Read on to understand the full implications of these developments.

By Narendra Chaudhary Apr 27, 2026, 15:08 IST

Economic Downturn Amidst Rising Oil Prices

India's economic trajectory is facing challenges following the fallout from the Iran conflict, which has led to a significant increase in crude oil prices, now exceeding $100 per barrel. This downturn was evident in the latest quarterly earnings reports, with analysts forecasting continued repercussions into the upcoming quarters, affecting the financial year 2026-27. JP Morgan has raised concerns regarding corporate earnings growth for FY27, anticipating that supply chain disruptions and high costs will linger for several months, even with a ceasefire in place. They predict that normalization of energy supplies could take an additional three to four months. Consequently, JP Morgan has adjusted its earnings forecasts for FY27 downward by 2-10% across various sectors, including Consumer, Automotive, Financial Services, and Oil Marketing Companies (OMCs).

According to JP Morgan, 'Challenges will manifest across sectors in various ways, including direct consumption impacts, margin compression, operational disruption, and second-order effects.' They have revised their MSCI India earnings growth projections for CY26/27 down by 2% and 1%, respectively, to 11% and 13%.

Bino Pathiparampil, head of research at Elara Capital, noted that prior to the West Asia conflict, they anticipated a 15% growth in Nifty EPS (earnings per share) for FY27. However, he now estimates this could drop to 7-8% if the conflict persists and oil prices remain high for an extended period, particularly affecting sectors like automobiles, oil and gas, and airlines.

Before the onset of the West Asia conflict, Nippon India Asset Management projected earnings growth of around 10-12%, with potential for further upside into FY26-27. They stated, 'If the situation in West Asia resolves quickly, there might be a one-quarter blip, but we should return to that 10-12% trajectory. If it drags on, earnings growth expectations could be revised down to around 6-10%.'

Despite these challenges, India Inc’s revenue growth has remained robust, although the growth dynamics are shifting. After eight consecutive quarters of growth primarily driven by volume, the current momentum is increasingly influenced by price, except in certain segments where GST rationalization has spurred a volume increase, according to credit rating agency Crisil.

The report emphasized that West Asia is a crucial trade and income corridor for India, representing approximately 13% of its goods exports (to the Gulf Cooperation Council) and around 38% of remittance inflows, which adds to the sensitivity through trade, freight, and income channels.

Furthermore, Foreign portfolio investors (FPIs) have turned net sellers in the Indian market over the past four months, with a net selloff of approximately ₹1.68 trillion since the start of 2026. Data from depositories indicates that March saw the most significant outflow, driven by tensions in the Middle East and subsequent global economic disruptions.