Downside risks to economy have begun materializing with West Asia conflict: Crisil
Crisil Intelligence warns the West Asia conflict is worsening India’s economic outlook, with GDP growth projected to slow to 6.6% in fiscal 2027 and the current account deficit widening to 2.2% due to disrupted trade, soaring crude prices, and weakened exports. The Strait of Hormuz closure has triggered the largest energy shock on record, raising inflation, import costs, and straining domestic industries reliant on global supply chains.
The ongoing West Asia conflict is escalating into a major economic threat for India, according to a Crisil Intelligence report. Over two months of unresolved tensions have disrupted global trade, with the closure of the Strait of Hormuz creating the largest energy shock ever recorded. Damage to oil and gas infrastructure in the region will delay recovery even after the route reopens, exacerbating supply chain bottlenecks and trade disruptions. India’s import-dependent manufacturing sector faces the brunt of these pressures, while weaker global demand stifles export growth. The economic fallout is already visible in macroeconomic indicators, with real GDP growth projected to slow to 6.6% in fiscal 2027, down from 7.6% in fiscal 2026. The current account deficit is expected to widen sharply to 2.2% of GDP in fiscal 2027, up from an estimated 0.8% in the previous year. Higher international crude, gas, and fertilizer prices will significantly increase India’s import bill, while exports suffer from global trade disruptions and declining demand. Remittances, which account for ~38% of India’s inflows, also face risks due to ongoing tensions in West Asia. Domestic inflation is projected to rise sharply to 5.1% in fiscal 2027, up from 2.0% in fiscal 2026, as elevated energy and transportation costs are passed on to consumers. Crisil has revised its Brent crude price forecast upward to $90–$95 per barrel for fiscal 2027, from an earlier projection of $82–$87. The shock extends beyond energy, affecting freight, insurance, supply chains, and fertilizer costs, creating multidimensional economic strain. While the government has contained retail fuel inflation so far, persistent global price hikes could further push up costs for cooking and transportation. The report highlights that producers will likely pass on rising input costs to consumers, raising core inflation and deepening economic pressures. The conflict’s impact spans energy, trade, and remittances, posing sustained challenges to India’s economic stability in the near term.
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