Crude prices are unlikely to fall to pre-Gulf war levels, says a Prabhudas Lilladher report. It expects oil near $92-95/bbl in FY27, widening India's import bill, inflating subsidies, and putting pressure on the current account deficit.
Crude Prices to Remain Elevated
Crude prices are unlikely to revert to pre-Gulf war levels of $65/barrel, Prabhudas Lilladher has said, as geopolitical uncertainty and supply-chain disruptions keep oil near $92-95/bbl in FY27. The brokerage expects the shock to widen India's import bill, inflate subsidies and put an upward bias on the current account deficit, even as demand is expected to take a hit over the coming months.
"We believe crude prices are unlikely to revert to pre-Gulf war conflict levels of USD65/barrel. The second level impact of high crude prices and supply chain disruption is likely to impact demand over coming months," Prabhudas Lilladher said in its June 12, 2026 report. It pegged the average oil price for FY27 at $92-95/bbl, pushing the import bill higher by an estimated $70bn to around $180bn for 4.3mn barrels/day. Higher freight rates and insurance costs will add to landed fuel costs, the brokerage said.
Steep Fiscal Impact
The fiscal impact looks steep. Fertilizer and input prices have spiked, with urea up 120% and DAP, sulphur, ammonia up 38%/87%/87% respectively, the report said. "This is likely to significantly inflate the budgeted subsidy bill of Rs1.7 trillion," Prabhudas Lilladher noted. Despite the government raising petrol and diesel prices by Rs8-9/litre and cutting excise, losses on petroleum products persist. Heavy losses on domestic LPG will also pressure fiscal math, it added.
Stress on External Account
Externally, the brokerage sees stress building. CAD is currently estimated at ~2% of GDP in FY27, but Prabhudas Lilladher expects "an upward bias given geopolitical uncertainty and sluggish global trade despite recent fiscal and monetary interventions." A depreciating currency, coupled with Rs3 trillion of FII outflow, compounds the strain.
Policy Response and Outlook
On the policy response, the government has imposed restrictions on gold imports after $80bn in FY26. Prabhudas Lilladher said there are hopes that "irritants around taxation and regulations regarding FPI investment in both debt and equity markets are being relaxed, which will have positive implications in LT."
The brokerage added that the impact of high crude demand and disrupted supply chains will play out over coming months. With oil staying elevated, the fiscal cushion will depend on how much subsidy and excise revenue is sacrificed to contain retail fuel prices. Until geopolitical risks ease, CAD and fiscal arithmetic remain key watchpoints for markets and policymakers.
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