Rising global oil prices due to the escalating West Asia conflict could significantly impact India's economic growth, with crude oil averaging between $85 and $100 per barrel likely to shave off up to one percentage point from GDP growth, Harvard professor and former IMF Chief Economist Gita Gopinath has warned.
Speaking to NDTV, Gopinath said the United States' war on Iran has already begun affecting India's growth outlook, with oil prices now emerging as the single most important factor for both the global and Indian economy. She noted that even if oil averages around $85 per barrel for the rest of the year, India's GDP growth could fall by about half a percentage point. If oil averages closer to $100 per barrel, the impact could be nearly one percentage point, making the situation already consequential for the economy.
She emphasised that the current crisis is not just a price shock but also a supply shock, which makes it more damaging. Much depends on what happens to energy infrastructure in major producers such as Saudi Arabia, the UAE and Qatar, as well as the situation in the Strait of Hormuz, a critical route for global energy supplies. Any disruption there could worsen shortages and push oil prices higher.
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Gopinath said India has so far not seen a sharp rise in fuel prices because oil marketing companies are absorbing much of the increase. However, she cautioned that this cannot continue indefinitely, and if high oil prices persist for several weeks, fuel prices in India will likely rise, putting pressure on inflation, the fiscal deficit and the balance of payments.
She also warned of second-round effects on food inflation. Fertiliser prices, particularly urea, have already risen sharply, and this typically feeds into food prices with a lag of around six months. As a result, India could see broader inflation pressures even if the immediate impact is limited to fuel.
On the global economy, Gopinath said a full global recession remains unlikely unless oil prices rise significantly further. However, if oil were to average around $120–$130 per barrel, global growth could slow sharply, creating a recession-like environment.
She added that even if the conflict ends soon, damage to energy infrastructure could take time to repair, meaning the world may face a prolonged period of slower growth and higher inflation, underscoring the need for India to push domestic reforms, expand capital markets and build greater economic resilience against external shocks.
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