The Iran-US war has now entered its 75th day, is beginning to show its ripple impact on the Indian economy. While at the consumer level, Prime Minister Narendra Modi has urged citizens to use petrol and fertiliser products with restraint, India’s GDP growth and inflation are expected to take a hit on the macroeconomic front.
Crisil revised India’s FY27 GDP growth forecast to 6.6% from 7.6% in FY26 and also raised its retail inflation estimate to 5.1% in FY27 from 2.0% in FY26. The analyst said that, besides the impact of the ongoing West Asia conflict, which has pushed oil and commodities higher and weakened Rupee, El Nino conditions are also expected to affect India’s growth-inflation mix this fiscal.
Crisil projected India’s current account deficit (CAD) to widen to 2.2% of GDP in FY27 from 0.8% in FY26. It also expects the rupee to average Rs 93.5 per dollar in March 2027 compared with Rs 92.8 earlier. Here is what the Economist highlighted.
Petrol, diesel prices may rise if crude oil surge persists
Crisil revised its Brent crude oil forecast for FY27 to $90-95 per barrel from $82-87 estimated earlier. The economist said the prolonged closure of the Strait of Hormuz has triggered the “largest energy shock on record”.
Crude prices stayed above $100 per barrel since mid-March and crossed $110 in April despite a ceasefire. Though the government has so far protected consumers by keeping petrol and diesel prices unchanged, a prolonged rise in crude oil prices remains a major risk.
| Economic indicator | FY26 | FY27 Forecast / Current Situation |
|---|---|---|
| India GDP growth | 7.6% | 6.6% |
| Retail inflation | 2.0% | 5.1% |
| Current account deficit (CAD) | 0.8% of GDP | 2.2% of GDP |
| Rupee outlook | Rs 92.8/$ | Rs 93.5/$ by March 2027 |
| Brent crude oil forecast | $82–87/barrel | $90–95/barrel |
“A persistent rise in global crude oil prices is a risk for higher pass-through in pump and retail fuel prices for cooking and transportation,” the report said.
El Niño, weak monsoon may add to India’s economic troubles
Apart from the energy crisis due to West Asia war, Crisil flagged weather-related risks. El Niño conditions and a below-normal monsoon could hurt farm output and rural demand, according to Crisil.
According to the India Meteorological Department (IMD), rainfall this year may remain at 92% of the long-period average, indicating below-normal rains.
According to the US National Oceanic and Atmospheric Administration, which sees a 61% chance of El Niño emerging during May-July 2026 and continuing through the year.
“If the prediction plays out, kharif and rabi output will be at risk,” Crisil said.
Exports take a hit amid West Asia conflict
India’s exports are already showing signs of stress because of weak global demand and disruptions caused by the conflict.
India’s exports in March declined 7.4% year-on-year, while exports to Saudi Arabia and the UAE fell 45.7% and 61.9%, respectively, according to the report.
Conclusion
Higher inflation driven by disruptions in agricultural production due to EL nino and rising commodity prices and crude oil prices due to Middle East war is expected to put pressure on household budgets. It may also weaken private consumption.
Crisil also warned that continued uncertainty due to the Iran could delay business decisions and weigh on private investments, adding further pressure on India’s growth outlook.
The war has already disrupted supply chains and raised international freight and insurance costs.