India warns of growth risks from Iran war as energy costs rise

2026-03-28 - 15:00

India faces downside risks to its growth forecast of 7.0% to 7.4% for the next ​fiscal year starting April 1, due to higher ‌energy costs and supply disruptions stemming from the Middle East conflict, according to its monthly economic report released on Saturday. The conflict, ​which began a month ago after the U.S. ​and Israel attacked Iran, has disrupted a key ⁠shipping route through which 20% of the world’s oil ​passes, pushing up energy and freight costs and straining supply ​chains. This is raising concerns over inflation and growth in India, the government review said. High-frequency data for April, and possibly May, should ​provide a clearer picture of growth prospects for the ​new financial year, India’s chief economic adviser V Anantha Nageswaran wrote in ‌the ⁠report. He said the current account deficit, which has already widened to 1.3% of GDP in the Oct-Dec quarter of the current fiscal year, will significantly worsen the ​next fiscal year. India ​will need ⁠to provide immediate, targeted relief to the most affected and vulnerable businesses and households, ​the report said. Domestic demand has remained relatively stable ​so ⁠far, but risks to growth are rising, particularly in sectors reliant on imported inputs. The Indian rupee weakened to about ⁠95 ​to the U.S. dollar in March ​amid capital outflows and higher import costs linked to the energy shock.