India’s economic growth outlook has been revised downward to 6 percent for the upcoming fiscal period, as global tensions linked to the ongoing conflict involving Iran continue to disrupt energy markets and increase financial uncertainty. According to Moody’s Ratings, the escalation in geopolitical instability is expected to weigh on domestic demand, industrial performance, and overall investment momentum in the country.
The downgrade from an earlier projection of 6.8 percent reflects growing concerns about India’s exposure to energy supply shocks. As one of the world’s largest importers of crude oil and liquefied petroleum gas, India remains highly dependent on stable supply routes through the Strait of Hormuz. Disruptions along this corridor have already forced policymakers to prioritize household fuel needs, leaving less energy available for industrial production.
Manufacturing sectors such as stainless steel and plastics have begun to scale back operations as fuel constraints and higher input costs affect production capacity. Analysts warn that these pressures could slow broader economic activity if the conflict continues for an extended period. Reduced industrial output combined with softer consumer spending may further dampen growth momentum in the months ahead.
Inflation is also expected to move higher as energy prices remain volatile. Moody’s projects average inflation to rise to about 4.8 percent in fiscal year 2026 to 2027, compared with roughly 2.4 percent in the previous fiscal year. While inflation has remained relatively contained so far, the evolving geopolitical environment has increased uncertainty around future price stability.
At the same time, India’s reliance on imported LPG continues to present structural challenges. Nearly 60 percent of the country’s LPG supply is sourced internationally, leaving households and industries vulnerable to fluctuations in global markets. Rising import costs could widen the country’s current account deficit if energy prices remain elevated for a prolonged period.
To address immediate supply risks, India has resumed imports of Iranian crude for the first time since 2019 after sanctions were temporarily eased. Officials say the move is intended to stabilize domestic fuel availability as authorities continue negotiating safe shipping routes and alternative supply arrangements during a period of heightened global instability.
