5 April 2026
Moody’s cuts India’s growth forecast to 6% amid Middle East war
Moody’s Ratings has reduced India’s economic growth forecast for the current financial year to 6% from 6.8% earlier.
The credit rating agency said the US-Israel war against Iran and its impact on global energy markets will impact India’s growth momentum and increase inflation risks.
“Given India’s economic risks due to the ongoing military conflict in the Middle East, we expect real GDP growth to slow to 6% in fiscal 2026-27 from 6.8% earlier,” India’s PTI news agency said, citing the Moody’s report.
The agency estimated that India’s economy faces a number of challenges, including “low private consumption, soft industrial activity and weakness in the pace of gross fixed capital formation amid elevated prices and higher input costs”.
India is the world’s fourth largest economy and third largest importer and consumer of oil. The South Asian country also imports 60% of its liquefied petroleum gas (LPG).
The overwhelming majority of these fossil fuel supplies come through the Strait of Hormuz, the key chokepoint in the Persian Gulf that Iran has effectively closed since the US-Israeli strikes began on February 28.
New Delhi has prioritized energy supply for households, reducing the amount available for industrial use. As a result, factories in sectors including stainless steel and plastics have cut production.
As the conflict escalates, concerns are rising over rising energy import bills and the possibility of widening current account deficits.
“Although inflation is currently under control, geopolitical risks have skewed the inflation outlook to the upside,” Moody’s said, forecasting inflation to average 4.8% in fiscal 2027.