Page 4 - Policy Economic Report - September 2026

POLICY AND ECONOMIC
OIL & GAS MARKET

Impact of economic factors on Oil & Gas sector in India

India’s oil and gas sector continues to play a critical role in supporting economic growth, industrial activity,
mobility and energy security. The broader economic environment in 2026 remains resilient, with India’s
GDP growth projected at 7.0% in FY2026 and 7.1% in FY2027. Strong domestic demand, public investment,
manufacturing activity and infrastructure development provide a supportive backdrop for energy
demand. At the same time, elevated global energy prices, geopolitical uncertainties and continuing
volatility in energy-related commodity prices present important challenges for the sector.

Strong economic growth supporting energy demand

India’s robust economic expansion is expected to sustain demand for petroleum products and natural gas
across transportation, manufacturing, power, petrochemicals and other industrial segments. Real GDP
growth of 7.8% year-on-year in the first quarter of FY2026 was supported by strong services and
manufacturing activity, while investment pipelines remained particularly strong in areas such as energy
and data centres.

The strengthening of manufacturing activity is particularly relevant for the oil and gas sector. The
September 2026 Manufacturing PMI increased to 55.7, while manufacturing output rose sharply,
indicating stronger operating conditions, new orders and purchasing activity. This broader industrial
momentum can support demand for transportation fuels, refinery products, natural gas and
petrochemical feedstocks.

Refining and petroleum products remain relatively resilient

Within the core infrastructure sectors, refinery products recorded 2.6% year-on-year growth in August
2026. Although this represented a moderation from July, it indicates continued resilience in downstream
activity. Refinery products also carry a significant 22.572% weight in the Index of Eight Core Industries,
making refinery performance an important contributor to overall industrial activity.
India’s petroleum-product exports also performed strongly. Petroleum product exports increased by
63.27% year-on-year in August 2026 to US$6.81 billion. This highlights the continued importance of India’s
refining capacity in meeting both domestic requirements and international market demand. The strong
export performance also reinforces the potential of the downstream sector to contribute to India’s
external trade and foreign-exchange earnings.

Domestic crude oil and natural gas production remains a key concern

While downstream activity remains comparatively strong, domestic upstream production continues to
face challenges. Crude oil production declined by 3.6% and natural gas production by 4.9% in August 2026.
The contraction in domestic production represents a divergence from the stronger performance of
refinery products and other core infrastructure sectors.

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