India’s economy is projected to expand by 6.3 percent in the 2026-27 period, S&P said, even assuming an average cost of crude oil of $130 per barrel. With crude at just $85 per barrel, growth can be 7.1 percent, the highest among major economies.
S&P Director (Sovereign and International Public Finance Ratings) Yee Fern Phua said, “This figure is very strong compared to any major economy in the world. India’s growth rate of 6.3 percent during this crisis is a strong signal, demonstrating better performance than other economies.” However, the agency cautioned that disruptions in energy supplies or fuel shortages could pose risks. Furthermore, high crude prices could widen the current account deficit. Rising corporate costs could impact profits. Furthermore, rising inflation could put pressure on consumer purchasing power.
According to S&P, while spending on subsidies will be increased to help consumers deal with higher energy costs, thereby adding to fiscal strain, this is unlikely to impact the sovereign credit rating of India.
The government is committed to fiscal balance in the long term. Spending is flexible, and if necessary, it can maintain the fiscal deficit target by cutting other items.
If energy prices remain high, the earnings of the country’s top 100 companies could decline by 15 to 20 percent in 2026-27. This will increase debt, ultimately putting pressure on their financial position. The debt-to-earnings ratio (leverage) of large companies could increase from 0.5 to 1 times.
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The refining and aviation sectors are most vulnerable. Sectors such as cement, metals, and steel are also at risk due to their dependence on energy imports. Rising fuel and food prices could reduce people’s purchasing power, which would also impact the banking sector.
Risk-rated loans, vehicle loans, and affordable housing could decline. In the worst-case scenario, NPAs could increase by around 1 percent annually.
If the situation remains challenging for a prolonged period, the Reserve Bank may allow debt restructuring for certain sectors to manage short-term liquidity pressures. Currently, there is no immediate threat to India’s BBB investment-grade sovereign rating.
India’s debt repayment capacity remains strong even after the Iran-US war. The Export-Import Bank (EXIM Bank) has stated that the ongoing conflict in West Asia has not yet impacted the debt repayments of Indian companies.
Harsha Bangari, MD and CEO of the Export-Import Bank, stated that although the activities of Indian companies doing business in West Asia have been somewhat affected in recent months, their debt repayment capacity remains strong. A stable and reliable economic fundamental has protected companies from financial crisis during times of global uncertainty. The key reason for the strength of Indian companies is the diversification of their revenue sources. This isn’t limited to West Asian countries. However, if the conflict prolongs, it could pose numerous challenges for companies.
The continued weakness in the rupee could benefit Exim Bank. A significant portion of the bank’s assets are held in foreign currencies, which could strengthen its balance sheet. Under current circumstances, rupee loans are preferred.
