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Middle East conflict clouds India’s economic outlook
The economic trajectory, which remained steady until early 2026, is now facing fresh headwinds as the conflict has disrupted key global supply chains, especially in energy and logistics, critical pillars of India’s economic stability.
The latest Monthly Economic Review by India’s Department of Economic Affairs projects a more uncertain economic outlook, citing disruptions to energy supplies and trade routes amid the Middle East conflict.
However, strong domestic growth, steady credit expansion, and resilient services exports continue to cushion the impact.
Despite rising risks, India has entered this phase from a sector steady.
The scale of disruption is stark. Ship movements through the Strait of Hormuz have nearly come to a standstill, from 200-300 a week to one a week, the review notes. This dramatic slowdown has tightened global oil and gas supply, pushing prices higher and increasing volatility across international markets.
The report warns of supply disruptions to oil, gas and fertilisers, higher import prices, higher logistics costs, and a possible decline in remittances by Indians in the Gulf countries.
These risks are particularly significant for India, which relies heavily on energy imports and has a large expatriate workforce in the Gulf region, contributing to remittance inflows.
Despite the risks, the review says India entered this phase from a position of strength.
On the domestic front, industrial activity has remained resilient.
“Retail inflation rose to a 10-month high of 3.21 per cent in February 2026, driven primarily by a sharp uptick in food prices,” said the review.
At the same time, the financial system continues to support growth. Bank credit expanded strongly, and the overall flow of financial resources to the commercial sector grew at 33.2 per cent (YoY).
The Finance Ministry review report emphasises the need for policy vigilance amid rising uncertainty.
Fibre2Fashion News Desk (DS)