However, the recent war between US-Israel and Iran, if it prolongs, is likely to dent the economy in many ways and some of the impacts are still unknown.
Prior to the Middle East conflict, the union governmen, in its second advance estimates under a newly formulated methodology, estimated gross domestic product (GDP) growth of 7.6 per cent in fiscal 2026, up from 7.4 per cent in the first advance estimates. The Economic Survey 2025- 2026, projects GDP growth for fiscal 2027 at around 6.8-7.2 per cent. These calculations may have to be revised downwards, as energy prices go haywire.
International oil prices have breached the USD 100 a barrel-mark for the first time since July 2022. So far, with no resolution for the war to end, crude prices are likely to trend higher. India imports about 85 per cent of its crude oil requirements and half of its LNG requirements. Out of this, 40- 50 per cent of crude oil and 50-60 per cent of LNG are shipped through the Strait of Hormuz which is the vital artery for global energy trade. This has been impacted and effectively closed to commercial shipping for the first time in recorded history.
Last Month, Union Minister for Petroleum and Natural Gas Hardeep Singh Puri informed parliament that India’s crude supply position is secure. Before the crisis, approximately 45 per cent of India’s crude imports transited the Hormuz route. Non-Hormuz sourcing has risen to about 70 per cent of crude imports, up from 55 per cent before the conflict began. India sources crude from 40 countries, against 27 in 2006-07, he said. The union government has also taken measures to prioritise LNG and LPG supplies.