India Faces Economic Risks Amid West Asia Oil Shocks

India continues to project strong economic growth despite significant headwinds from the West Asia conflict, which escalated on February 28, 2026. S&P Global Ratings reports that India's growth could reach 7.1% in fiscal 2027 under base-case oil prices of $85 per barrel, though it could dip to 6.3% if prices average $130 per barrel. While the International Monetary Fund slightly upgraded India's FY27 growth forecast to 6.5%, it lowered global growth projections to 3.1% due to disruptions in the Strait of Hormuz.

Chief Economic Advisor V. Anantha Nageswaran estimated GDP growth at 7.6% for the year ending March 2026, attributing the resilience to macroeconomic strength and infrastructure investment. However, rising energy costs are fueling inflation; the Union Bank of India warned that interest rates may rise if crude oil stabilizes above $90 per barrel, following the Reserve Bank of India's April 8 decision to hold the repo rate at 5.25%.

Trade dynamics have shifted as the United States reduced tariffs on Indian goods from 50% to 10%, boosting exports to $8 billion in March. Despite this, Crisil warns that the current account deficit could rise to 2.0% of GDP in fiscal 2027 if oil prices remain between $82 and $87 per barrel. S&P Global Ratings maintains that India's sovereign credit rating should remain stable due to a long-term political commitment to fiscal consolidation, even as the government may need to cut infrastructure spending to offset energy subsidies.