UBS: India Economics Presentation (April 2026)
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UBS highlights that the Indian economy faces mounting challenges as surging oil prices and natural gas shortages leave the country particularly vulnerable. Economic activity momentum has weakened since March. The Middle East conflict is delivering asymmetric macroeconomic impacts, with households facing near-term headwinds from inflation and reduced policy support.
India imports 89% of its crude oil requirements, with half originating from the Middle East. Sensitivity analysis indicates every 10% increase in average crude prices could lower GDP growth by 15 basis points, assuming full pass-through to consumers. Furthermore, a month-long natural gas disruption could drag GDP down by approximately 20 basis points. UBS models a five-week disruption scenario where Brent crude averages USD 100 per barrel in the second quarter, USD 85 in the third, and USD 80 in the fourth quarter of 2026.
Inflation risks are rising due to energy supply interruptions and weather-related concerns. Rural demand shows signs of peaking, urban demand remains resilient but is narrowing, and private capital expenditure stays cautious amid geopolitical uncertainty. UBS forecasts India's real GDP growth at 7.6% for fiscal year 2026, decelerating to 6.7% in fiscal 2027. Average CPI inflation is projected at 2.1% for fiscal 2026, increasing to 4.6% the following year. The Indian rupee is expected to remain weak, ending fiscal 2026 at 92.0 against the US dollar, while fiscal policy must shoulder the burden of supporting growth.