Experts: India's GDP growth to slow to 6% in FY 2027 due to Middle East crisis

Analysts at Ernst & Young (EY) believe that India's GDP growth in the fiscal year 2027 could decline by one percentage point from the current forecast of 6%, due to the ongoing crisis in the Middle East.

In EY’s Economic Outlook report, it is pointed out that if the Middle East conflict persists into the next fiscal year, it could affect several sectors, including labor-intensive industries such as textile manufacturing, pharmaceuticals, chemical products, fertilizers, cement, and automobile tires.

Any layoffs or income reductions in these sectors could further depress aggregate demand. The analysts warn that both supply conditions and demand conditions may ultimately be impacted by shocks in the global oil market.

The report states: "If this negative impact persists throughout the entire FY 2027, our assessment suggests that India’s actual GDP growth could decrease by approximately one percentage point, while inflation could rise by about 1.5 percentage points above the baseline forecasts of 7% and 4%."

EY analysts note that India, which imports nearly 90% of its oil, remains highly dependent on imported natural gas and fertilizers, making it especially vulnerable to such external shocks. If circumstances allow, these negative effects could continuously spread across numerous economic sectors due to the close and direct feedback loops with oil and energy resource markets.

Continued conflict in the Middle East has caused extreme instability in global oil and energy markets, affecting supply volumes, storage conditions, transportation, and prices. The report notes that even if the conflict is resolved shortly, restoring normal conditions in some of these sectors may take considerable time.

In its report published in February, EY projected that India’s GDP growth for the fiscal year 2026–2027 would range between 6.8% and 7.2%.

Original article: toutiao.com/article/1861186198373376/

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