India’s Chief Economic Advisor said the West Asia conflict and resulting oil-price shocks pose downside risks to growth and inflation for fiscal year 2027 [1].
These warnings highlight the vulnerability of the Indian economy to external energy shocks. Because India relies heavily on crude oil imports, disruptions in supply routes like the Strait of Hormuz can trigger inflation and slow industrial output.
The conflict began on Feb. 28, 2026 [1]. The resulting energy shock has already influenced major economic forecasts for FY27, which spans from April 2026 to March 2027 [1]. The Reserve Bank of India cut its real-GDP growth forecast for the period to approximately 6.6% [1].
Other financial institutions have provided similar or more conservative outlooks. Crisil also projected real-GDP growth at 6.6% [2] and estimated the current-account deficit at 2.2% of GDP [2]. However, UBS provided a lower real-GDP growth forecast of 6.2% [3].
Inflation remains a primary concern for the government. The RBI set its CPI inflation outlook for FY27 at around 5.1% [1], a figure mirrored by projections from Crisil [2]. These figures reflect the pressure that higher global oil prices place on domestic consumer prices.
The Chief Economic Advisor said the macro backdrop is heavily influenced by the instability in the Middle East. The potential for prolonged disruptions to crude-oil supplies continues to threaten the stability of the national economy [1, 2].
“The Reserve Bank of India cut its real-GDP growth forecast for the period to approximately 6.6%.”
The divergence between the RBI's 6.6% growth forecast and UBS's 6.2% forecast suggests uncertainty regarding India's resilience to energy shocks. If oil prices remain elevated due to the West Asia conflict, the government may face a difficult balancing act between controlling inflation and stimulating growth, potentially leading to tighter monetary policy to keep CPI inflation near the 5.1% target.
