New Delhi, Mar 31 (KNN) India’s economic growth could slow and inflation may rise if the ongoing conflict in West Asia continues into the next financial year, according to the EY Economy Watch report.
The EY report estimates that real GDP growth could decline by about 1 percentage point, while retail inflation may increase by around 1.5 percentage points from baseline projections, PTI reported.
Sectoral Impact and Demand Concerns
The report highlights that several sectors—particularly employment-intensive ones such as textiles, paints, chemicals, fertilizers, cement and tyres—could face direct impact.
A decline in jobs or incomes in these sectors may weaken overall demand, affecting both supply and consumption conditions.
India’s heavy reliance on energy imports makes it especially exposed to global disruptions. The country imports nearly 90 per cent of its crude oil needs and depends significantly on imported natural gas and fertilizers.
Disruptions in oil supply chains can therefore have cascading effects across multiple industries due to strong linkages with energy costs.
Market Disruptions and Policy Response
The ongoing conflict in West Asia has disrupted global crude oil markets by affecting supply, storage, transportation and pricing. The report notes that even if the conflict eases soon, normalization in energy markets could take time.
EY had earlier projected India’s GDP growth at 6.8–7.2 per cent for FY27. However, prolonged disruptions may push growth lower and raise inflation above the baseline estimates of 7 per cent and 4 per cent, respectively.
The report suggests that the Government of India may need to adopt countercyclical policy measures and involve major industrial states in managing the impact.
It also recommends strengthening the Economic Stabilization Fund (ESF), for which the government has already allocated Rs 1 lakh crore as a buffer against global shocks.
(KNN Bureau)
