New Delhi: India’s inflation outlook is expected to improve significantly over the next financial year as global crude oil prices trend lower, providing relief on both prices and growth. Projections indicate that crude prices could decline sharply to around 50 dollars per barrel by mid 2026, helping keep consumer price inflation decisively below 3.4 percent in FY27.
Softening energy prices are also expected to provide a modest boost to economic growth. Lower fuel costs typically reduce input expenses across sectors, improve household purchasing power, and ease pressure on government finances. The combined effect could add an estimated 10 to 15 basis points to annual GDP growth, supporting broader economic momentum.
Global crude markets are witnessing increased supply and rising inventories, which are weighing on prices. Brent crude is projected to average close to 55 dollars per barrel in early 2026, a trend that has direct implications for India given the near perfect correlation between Brent prices and the Indian crude basket. This close linkage suggests that further declines in global prices are likely to translate into softer domestic energy costs.
Technical indicators reinforce the outlook for continued moderation. Current Indian crude prices are trading below both short term and long term moving averages, pointing to a downward bias. Forecast models indicate that prices could ease to nearly 53 dollars per barrel by March 2026 and fall further to around 52 dollars by June 2026.
As India follows a dynamic daily fuel pricing mechanism, declines in crude prices are expected to gradually pass through to retail fuel prices. Historical trends show a moderate transmission to the fuel component of the consumer price index, which plays a key role in shaping headline inflation.
A projected correction of about 14 percent in crude prices during the final quarter of FY26 could exert notable downward pressure on inflation in FY27. Even with partial pass through, this moderation is expected to pull average inflation well below the 3.4 percent mark.
Additionally, softer oil prices may support the rupee by improving the trade balance. Currency appreciation could further dampen imported inflation, reinforcing the overall disinflationary trend and strengthening macroeconomic stability going into FY27.
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