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Tue, 07 Apr 2026

Tue, 07 Apr 2026 India's high-growth economy gets a Middle East oil shock

India's currency, stocks and growth projections take a beating as the country faces a triple energy shock due to Iran war.

* India's economic growth story has been disrupted by the ongoing war in the Middle East, causing a sharp decline in the value of the rupee (down nearly 10% against the US dollar in the last year).
* The RBI intervened to curb speculation but this relief is likely to be temporary.
* In a worst-case scenario, the rupee could plunge beyond 110 to the dollar, according to Bernstein.
* Persistent weakness in the currency can negatively impact everything, including consumer prices, corporate margins, government deficits and capital flows into the stock market.
* India's benchmark equity indices are down 12% since the beginning of the year amid an outflow of foreign money.
* The global tensions have also begun to negatively weigh on India's inflation and growth outlook.
* GDP growth forecast for FY 2026-27 may be shaved off by as much as 1%.
* Inflation is rising, with food costs spiking, but energy prices at the pumps remain stable so far due to government subsidies.
* India imports 60% of its natural gas and over 90% of LPG from the Middle East, making it vulnerable to supply disruptions.
* Supply shortages are already being felt in various sectors, including restaurants, hotels, food processing factories, ceramics industry and funeral services.
* Economists warn of a "stagflationary shock" where inflation goes up and growth stagnates.
* The government has proposed an economic stabilisation fund but the funds are modest relative to the scale of the challenge.