A big warning has come from abroad regarding the Indian economy. UBS, a global financial firm from Switzerland, has issued this warning regarding India’s development journey. In its report, UBS said that due to the deepening oil crisis due to global tensions, GDP growth is expected to slow in FY2027; As a result, the firm has reduced its growth forecast to 6.2 percent. A new report by UBS Research presents worrying projections about India’s economic outlook. It said India may see a sharp decline in economic growth in FY27 due to the ongoing conflict in the Middle East, severe supply chain disruptions and a prolonged energy crisis caused by rising inflation.
Estimated pace of GDP growth
Global brokerage firm UBS has said it is lowering its forecast for India’s GDP growth in FY27 to 6.2 per cent due to various factors, including the oil crisis. The firm has cut its estimate by 50 basis points. Earlier, UBS had estimated that India’s GDP would grow at a pace of 6.7 percent.
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UBS said that India’s economic growth appeared to be slowing down during the month of March. Manufacturing activity has weakened, and growth in core sectors has also declined. Amid the LPG shortage and rationing measures in India, fertilizer production has also seen a sharp decline.
Three main reasons for slowness in GDP growth
**First:** The UBS report identifies three major factors behind the slowdown in the Indian economy. The primary factor cited is the deepening oil crisis that could arise from the possible closure of the Strait of Hormuz in the event of a conflict between the US and Iran. Issuing a warning, the brokerage firm said that if oil prices continue to remain at high levels, the risks associated with them will further increase. Following Iran’s recent attack on a US warship, crude oil prices have once again reached near the level of $114 per barrel. The report said the ongoing conflict in the Middle East is no longer limited to just a disruption in crude oil supplies, but is also impacting refined fuel supplies, shipping routes and industrial supply chains—creating a historically significant energy crisis for emerging markets like India. The brokerage firm estimates that if the average crude oil price for India remains around $100 per barrel, India’s real GDP growth rate will slow to 6.2% in FY2027.
Second: If the monsoon situation worsens, the country’s economy may suffer a major blow, and the risks associated with it may increase. The India Meteorological Department’s initial long-range forecast for the 2026 monsoon season projects below normal rainfall, which will put pressure on rural demand and food inflation.
The report notes that if rainfall levels remain below normal, rural demand may further weaken. With a greater than 60% probability of El Nino conditions occurring during the June-September period, risks to agricultural production, rural wages and FMC demand increase. India’s rural sector accounts for about 38% of the total FMC consumption.
Third: According to UBS, domestic consumption accounts for about 56% of India’s gross domestic product (GDP). The sector is currently facing increasing pressure due to high inflation, slow nominal income growth and weak employment conditions.
Fuel and transportation together account for about 15–16% of household expenditure, making consumers highly sensitive to frequent fluctuations in energy prices. UBS expects the rupee to depreciate further, and estimates the USD/INR exchange rate to reach 96 by the end of 2027. The report suggests that due to inflation concerns, the RBI may be forced to raise interest rates.
