Middle East Conflict Threatens India's Economic Growth

A report by Ernst & Young has raised concerns over India's economic prospects amidst the ongoing conflict in the Middle East, cautioning that prolonged disruptions could shave around one percentage point off India's growth while pushing inflation higher.

The report, titled 'Economy Watch: Monitoring India's macro-fiscal performance', highlights how geopolitical tensions have destabilized global crude oil markets, impacting supply, storage, transportation, and prices. If these effects persist into the next fiscal year, experts anticipate a weaker growth trajectory and rising inflation.

Significantly, the report estimates that sustained conflict could erode India's GDP growth by nearly one percentage point and raise CPI inflation by about 1.5 percentage points from baseline expectations of 7% and 4%, respectively. This comes at a time when the Indian economy is otherwise demonstrating robust momentum, though signs of moderation are emerging amidst geopolitical uncertainties.