The impact of the ongoing military conflict in West Asia (Middle East) is now clearly visible on the Indian economy. Global rating agency Moody’s Ratings has reduced India’s economic growth rate (GDP) estimate for the current financial year 2026-27 from 6.8 percent to 6 percent. Moody’s believes that due to this tension, the pace of India’s growth will slow down and the risk of inflation in the country will also increase significantly.
Moody’s warned in its credit outlook report that if the disruption in West Asia persists for a longer period, there could be shortages, especially of cooking gas (LPG), for Indian households in the coming days. Along with this, there is also a possibility of huge increase in the cost of fuel and transportation.
It is noteworthy that India is heavily dependent on this sector for its energy needs. About 55 percent of India’s total crude oil imports and more than 90 percent of its liquefied petroleum gas (LPG) imports come from this region. Apart from this, India is also dependent on imports for fertilizers, due to which there is a full danger of increasing food inflation. According to the report, Moody’s estimates that the average inflation (inflation rate) will increase to 4.8 percent in the financial year 2026-27, which was only 2.4 percent in the financial year 2025-26.
The agency believes that in view of the increasing risk of inflation, the Reserve Bank of India will either keep the policy rate ‘repo’ stable or may increase it gradually. However, it will all depend on how long the geopolitical tensions drag on.