9 April 2026
India was one of the fastest growing major economies despite Iran – World Bank
The World Bank said India is likely to remain among the world’s fastest-growing major economies despite the war in Iran, but warned that the country could face significant risks as the conflict raises inflation concerns.
The World Bank said the economy is somewhat insulated from strong macroeconomic fundamentals and policy buffers.
“Adequate foreign reserves, low inflation, public debt predominantly in rupee terms, a healthy financial sector and trade diversification efforts play a major role in providing resilience to external headwinds,” it said.
That said, India’s dependence on energy imports from the Gulf risks inflation and weakening the fiscal position if the conflict prolongs.
“Disrupted labor markets in Gulf economies (the source of about 38% of India’s remittance inflows) will reduce secondary income surpluses. These factors will put additional pressure on the rupee,” the report said.
“If measures to limit fuel prices to consumers – such as excise rate cuts and increased subsidies – are extended, fiscal risks will also increase,” it said. The report said that although policies will mitigate risks, persistently high global energy prices will ultimately lead to higher retail inflation and weigh on domestic demand.
The US-Israel war with Iran has restricted the flow of oil and gas to India, which imports most of its energy needs. Domestic gas prices have increased modestly but the government and its oil companies have so far absorbed most of the impact.
On the other hand, the Indian rupee weakened against the dollar and became the worst performing currency in Asia.
World Bank India economist Aurelien Kruse has estimated retail inflation in India at 4.9%, reflecting higher food and energy prices. He was speaking at a press conference in New Delhi after the release of the report.
India’s central bank left interest rates unchanged on Wednesday and projected retail inflation at 4.6% for the year. The Reserve Bank of India expects the country’s economy to grow at 6.9% in fiscal year 2027, while the World Bank expects a growth rate of 6.6% in the same period.