Citi India has increased the consumer price index (CPI) inflation forecast for FY23 by 70 basis points (bps) to 5.7 percent. One basis point is one-hundredth of one percentage point.

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The CPI could inch to 6.3 percent in FY23 if oil prices remain at $110-120 per barrel, the rating agency stated.

The crude price rose on Friday but extended its decline from its 14-year high. It came off from $136 per barrel of a high to $109 per barrel. This was after Russia pledged to fulfil contractual obligations.

Citi cut India’s FY23 real gross domestic product (GDP) growth forecast by 50 bps to 7.5 percent. The GDP growth could fall closer to 7 percent if crude oil prices remained elevated, Citi India stated.

India's GDP was expected to grow at 9 percent in the third quarter of FY22, Citi had said in a report in January 2022.

For FY22, the National Statistical Office (NSO) had recently forecast 8.9 percent growth in GDP as against 9.2 percent previously.

For the current financial year, Citi forecast India's GDP growth at 2.9 percent in the fourth quarter, as against the NSO's estimate of 4.8 percent.

Vikas Halan, Associate Managing Director of Corporate Finance Group at Moody's Investors Services in an interview to CNBC-TV18 earlier this month had said that crude prices could move even higher from the current levels.

He said that if the Russia-Ukraine war prolonged then oil could be in the range of $100-150 in the next couple of quarters. He had said he also expected the oil prices to remain elevated for 2-3 years.

The oil market had kicked off this year on a positive note. Oil prices had surged nearly 50 percent last year, spurred by the global economic recovery from the COVID-19 pandemic slump and restraint on production.

Citi global forecast the average for Brent crude at $84 per barrel in FY23 versus $67 earlier.

On Thursday, Brent crude futures were up 2.8 percent, at$114.24 a barrel while US West Texas Intermediate (WTI) crude futures were up 1.5 percent, at $110.28 a barrel.

Citi global’s bull case for crude was $119 per barrel for FY23.