The growing tension in the Middle East is impacting the global economy, and now its impact can be seen in India as well. The Asian Development Bank (ADB) has warned that the ongoing crisis in the Middle East could lead to a prolonged rise in crude oil prices. This may increase inflation in India, but it may also have a negative impact on the country’s economic growth rate.
Crude oil prices may remain high
According to a PTI report, ADB Chief Economist Albert Park said that if the Middle East crisis continues for a long time, it will have a deep impact on the supply chain and could push up crude oil prices. According to their estimates, the average price of crude oil in 2026 could be around $96 per barrel. Subsequently, it is expected to be around $80 per barrel in 2027.
Impact on India’s GDP growth
Albert Park said that this crisis will also affect India’s economic growth rate. ADB estimates that India’s GDP growth rate could decline by 0.6 percentage points, possibly reaching 6.3 percent. It is worth noting that in April, ADB had estimated India’s GDP growth rate for the current fiscal year at 6.9 percent, while it was expected to reach 7.3 percent in the next fiscal year. However, the good thing is that the Indian economy is expected to be back on track next year.
Can inflation increase?
The impact of increase in crude oil prices will not be limited to GDP only. Along with this, inflation may also increase in India. ADB had initially estimated inflation for the current fiscal year at 4.5 percent; Now this estimate has been revised to 6.9 percent. This means that the inflation rate in India may increase by 2.4 percent.
Why will inflation increase?
India imports a large part of its oil and gas needs from abroad. As a result, if oil and gas prices increase in the international market, it will directly impact India. Additionally, rising gas prices will increase the cost of fertilizers and agricultural raw materials, thereby increasing operating costs for farmers. If farmers use less fertilizer, crop production may decrease. This will have a direct impact on the prices of food items. In other words, it is clear that if tensions in the Middle East persist for a long time, it will directly lead to an increase in inflation in India—which will have a direct impact on the common man’s wallet.