ICICI Bank Lowers India's GDP Projection Amid Global Disruptions

ICICI Bank has revised its GDP growth estimate for India in the 2027 fiscal year, now projecting a range between 6.8% and 6.9%, down from an earlier forecast of 7.2%. This revision is attributed to ongoing global disruptions impacting energy supply and manufacturing momentum, as noted in a recent report released by the bank.

The report emphasized that the changes are largely due to geopolitical tensions affecting oil prices and supply chain operations, influencing domestic production. Despite earlier predictions of robust growth—highlighted by a 7.8% year-on-year rise in the third quarter of FY2026—the outlook now faces significant challenges.

High-frequency indicators like automobile sales and bank credit data up until February suggested steady growth momentum. However, the war has severely impacted the supply of energy commodities such as liquefied natural gas and liquefied petroleum gas, with effects already visible in industrial output data.

The bank's report revealed that the Manufacturing Purchasing Managers’ Index (PMI) for March fell to 53.9 from February's 56.9, demonstrating an immediate response to these challenges. It further noted that industries are prioritizing household energy needs over industrial supply, leading to potential production cutbacks in sectors like fertilizers, ceramics, and metals.

The analysis points out that while oil prices alone may not drastically impact GDP growth—as seen in past trends—current conditions are likely to affect specific quarters, such as Q4FY26 and Q1FY27. Additionally, external trade faces setbacks due to blockades like the one affecting the Strait of Hormuz, complicating exports to the GCC, which accounts for 15% of India's total exports.

The report concludes by stating that although there are expectations for a normalization of supply lines soon, near-term growth remains under pressure due to high global oil prices averaging around USD 100 per barrel.