India's GDP Set to Slow Due to Middle East Conflict Impact

Crisil Intelligence has warned that ongoing tensions in West Asia could impact India’s economic growth projections. Due to the conflict, prices of crude oil and other commodities have surged and as a result, India’s real GDP growth for the fiscal year 2026–27 could be limited to around 7.1%, according to the report. However, Crisil notes that this still represents a healthy rate of growth, supported by robust private consumption and increasing private investments. The report also forecasts retail inflation to rise to approximately 4.3% in 2026–27, compared with 2.5% in 2025–26, indicating a return to normal levels from the current lows.

Rising crude oil prices are also putting pressure on India’s public sector oil marketing companies, including IOCL, BPCL and HPCL, as highlighted by international rating agencies such as S&P Global Ratings, Moody’s Investors Service and Fitch Ratings. India relies on imports for nearly 88% of its crude oil requirements and about half of its natural gas needs, with 30–55% of supply coming through the Strait of Hormuz. Strategic petroleum reserves cover only around 10 days of consumption, while commercial stocks are sufficient for approximately 65 days, creating vulnerability for the oil marketing companies.

Even with government support, Fitch has warned that prolonged disruptions in crude oil or LNG supply could exert short-term pressure on the companies’ credit profiles. Rising input costs are likely to compress marketing margins, according to Moody’s, while S&P notes that regulatory directives and increasing prices could further reduce profitability. Private firms such as Reliance may initially benefit from stockpiles, but analysts caution that any supply disruption could create operational challenges in the future.