India's capacity to withstand a prolonged increase in global oil prices could come under severe pressure despite its presently resilient macroeconomic backdrop, according to a note from ANZ Research. The economists behind the note point out that the economy has entered the current energy price shock with "high growth and low inflation," a markedly different starting point from the period around the Russia-Ukraine war when inflation pressures were already mounting.
ANZ stresses that if oil and gas prices remain elevated for a prolonged period, the economic burden will be distributed across three main groups: oil marketing companies (OMCs), the government and households. The central observation is that "Any sharp oil price shock is essentially a drain on domestic net savings for an energy importer like India," and the key policy and market question is how the shock is shared among those three agents.
OMCs commonly absorb part of a fuel price shock by maintaining pump prices at stable levels, but ANZ notes these firms have a finite capacity to shield consumers. Using their estimates, the research house calculates that if crude averages $80 per barrel in fiscal year 2027 and pump prices are not adjusted, OMCs could face losses of around 80 billion rupees per month, roughly $960 million. Under a scenario where crude rises to $100 per barrel, monthly losses for OMCs could reach about 241 billion rupees.
To put those numbers in context, ANZ points to the combined profitability of the country's three largest OMCs, which totaled roughly 720 billion rupees over the four quarters to the end of 2025. Based on that profit cushion, ANZ estimates it could offset losses for about nine months at an $80 per barrel average, but only around three months if oil averaged $100 per barrel.
The research note also outlines fiscal vulnerabilities. Higher energy costs can lift government outlays through larger subsidies for items such as fertilisers and cooking gas. ANZ estimates such subsidy increases could add between 0.2% and 0.5% of GDP to government spending under sustained elevated energy prices.
Beyond corporate and fiscal strains, ANZ flags potential macro side effects: a decline in household savings and a likely widening of the current account deficit, which together could increase pressure on the currency and heighten volatility.
Looking ahead, ANZ expects oil to average about $85 per barrel in 2026, a level the economists say would likely slow growth modestly and lift inflation but remain "manageable" for the broader economy. The note refrains from assigning outcomes beyond these quantified scenarios and frames its conclusions around how losses could be allocated among OMCs, the state and households.
Key takeaways:
- India's starting macro position for the current energy shock is characterized as "high growth and low inflation," providing a different baseline than during the Russia-Ukraine period.
- ANZ estimates OMC monthly losses of about 80 billion rupees at $80 per barrel and about 241 billion rupees at $100 per barrel if pump prices remain unchanged.
- Higher energy costs could add 0.2%-0.5% of GDP to government spending via larger subsidies for fertilisers and cooking gas.