Demand shock warning: How has US-Iran war impacted Indian economy so far? Why RBI is both cautious and confident
The US-Iran conflict has impacted the Indian economy, with Indian equities declining and the rupee depreciating against the US dollar in March. The RBI remains cautious, citing softening consumer confidence and moderation in business optimism.
The US-Iran conflict has affected the Indian economy, with key external sector vulnerability indicators remaining contained at end-December 2025, according to the RBI. Indian equities declined in March due to persistent uncertainty and selling pressures by foreign portfolio investors. The rupee depreciated against the US dollar in March due to financial market volatility. The RBI notes that available high-frequency indicators displayed divergent trends in March, with demand conditions remaining resilient despite some slowdown. The central bank's forward-looking surveys point to softening consumer confidence and moderation in business optimism. Global commodity prices surged sharply, and consumer sentiments plummeted due to concerns over higher prices. The IMF has projected a moderation in global growth in 2026 alongside an increase in inflation.
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