India’s economic growth in the fiscal year 2026-27 is facing notable downside risks due to rising oil prices linked to escalating conflict in the Middle East and a potentially weak monsoon season influenced by the El Niño weather phenomenon, an International Monetary Fund (IMF) official said.
Ranil Salgado, the IMF’s senior resident representative for India and Bhutan, highlighted that India’s heavy reliance on imported oil—accounting for nearly 80 percent of its consumption—makes the country vulnerable to energy price shocks. Such volatility could undermine growth prospects and fuel inflationary pressures.
The IMF recently adjusted its forecast for India’s gross domestic product (GDP) growth in 2026-27 downward by 10 basis points to 6.4 percent. Conversely, the Fund raised its forecast for the subsequent fiscal year, 2027-28, by 20 basis points, projecting growth of 6.7 percent. Salgado noted that expanding hostilities in the Middle East are contributing to volatility in global crude markets. Although oil prices surged above $90 per barrel recently amid concerns about potential supply disruptions in the Strait of Hormuz, prices have eased somewhat due to reports of U.S.-Iran mediated negotiations, despite ongoing attacks and threats from Houthi forces against Saudi Arabian shipping routes.
In addition to geopolitical factors, the IMF official pointed out that this year’s projections did not fully incorporate the impact of a weak monsoon season tied to El Niño. India’s agricultural output and broader economy typically depend heavily on monsoon rains, which support both farming and rural incomes. Salgado said that while there was a delayed onset to the monsoon with some recovery observed in July, the full seasonal performance remains uncertain and could influence economic outcomes.
Separately, the IMF plans to reassess the reliability of India’s national accounts data after the country’s statistics department completes revisions to the GDP base year for 2022-23, expected by the end of 2026. Salgado indicated that the Fund’s evaluation will occur during the next Article IV consultation later this year, with the resulting report slated for release in 2025. Potential improvements ahead of this review include incorporating new and rebased wholesale price indices, updated industrial production data, and alignment of historical GDP figures with revised base years.
India’s national accounts methodology received a ‘C’ rating—the second-lowest grade—from the IMF in November, reflecting concerns about data weaknesses. The upcoming reassessment aims to evaluate progress in addressing these methodological challenges.