Page 6 - Policy Economic Report - September 2026

POLICY AND ECONOMIC
OIL & GAS MARKET

Executive Summary

The global economy remained resilient during September 2026, despite heightened geopolitical tensions,
renewed disruptions to energy supplies and tighter global financial conditions. Global growth moderated
during the first half of the year, but the impact of the energy shock was partly cushioned by additional
energy supplies, oil inventory drawdowns, substitution towards alternative energy sources and
government support measures. At the same time, strong artificial intelligence (AI)-related investment and
technology production continued to provide an important source of economic momentum, particularly
across the United States, Canada, Australia and major Asian economies. Global growth is projected at 2.9
per cent in 2026 and 3.0 per cent in 2027, although the outlook remains subject to significant energy,
geopolitical and financial-market risks.

The global inflation outlook became more challenging during the month, with renewed increases in energy
prices pushing headline inflation higher across several economies. Brent crude prices rose above US$100
per barrel, while European natural gas prices also increased sharply amid concerns over supply and winter
storage. The energy shock has increasingly spilled over into global financial markets, with the US 10-year
Treasury yield rising above 5 per cent and long-term borrowing costs increasing across major economies.
The interaction between elevated energy prices, persistent inflation and higher interest rates has
consequently emerged as a key risk to global growth and investment.

Against this global backdrop, India's domestic economy continued to demonstrate considerable
resilience. The ADB raised India's FY2026 growth forecast to 7.0 per cent, supported by stronger-than-
expected investment demand, robust capital expenditure and resilient services exports, while growth is
projected at 7.1 per cent in FY2027. Real GDP growth stood at 7.8 per cent year-on-year in the first quarter
of FY2026–27, supported by strong services and manufacturing activity. Public investment, an improving
private investment cycle, technology-related exports and resilient domestic demand continued to provide
important foundations for economic expansion.

India's growth outlook nevertheless remains exposed to external and domestic risks. Higher global energy
prices could increase production and transportation costs, while trade disruptions and weaker global
demand could affect merchandise exports. Weather-related risks have also emerged as a concern, with
monsoon rainfall remaining below normal and the possibility of weaker agricultural output and higher
food prices. Despite these challenges, India's combination of public capital expenditure, manufacturing
capacity expansion, services growth and technology-led exports is expected to support continued
economic momentum.

Inflationary pressures in India strengthened during August. Headline CPI inflation increased to 4.82 per
cent, while food inflation rose to 5.95 per cent. Wholesale price inflation remained considerably higher
at 9.92 per cent, driven particularly by fuel and power, manufactured products and mineral oils. The
continued divergence between retail and wholesale price pressures highlights the importance of
monitoring energy and input costs, particularly amid elevated international crude oil and natural gas

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