India’s economy under intense pressure due to West Asia crisis: Govt Dept report
New Delhi, April 30: With the energy imports from West Asian region impacted badly, India’s economy is facing intense pressure, with risks tilted towards higher inflation, wider fiscal and external deficits, and slower growth if disruptions in energy and fertiliser supplies persist.
These are the assessments of the Finance Ministry’s Department of Economic Affairs (DEA) carried in its Monthly Economic Review for April 2026.
It said India “at the intersection of domestic resilience and external turbulence” as the West Asia war has altered the macroeconomic outlook of India after real GDP growth of 7.6 per cent in the previous fiscal year.
India is increasingly exposed to external shocks from the West Asia crisis, which has disrupted energy imports and affected fertiliser and industrial raw material supplies.
The Review said though the growth momentum has moderated since its peak in November 2025, the E-way bill generation touched an all-time high of 140.6 million in March 2026, indicating strong goods movement.
Recent data up to April 22 shows continued resilience in logistics activity, registering 13.7 per cent year-on-year growth compared with 12.9 per cent in March.
Purchasing Managers’ Index trends also remain in expansion territory, albeit with easing momentum.
The International Monetary Fund has raised India’s 2026-27 growth forecast to 6.5 per cent from 6.4 per cent, keeping the country among the fastest-growing major economies.
Crude oil prices a key pressure point:
India’s crude basket averaged USD 113 per barrel in March and stood just under USD 115 per barrel through April 24.
The report said higher wholesale prices indicate rising cost pressures even as consumer inflation remains contained.
Retail inflation rose to 3.4 per cent in March from 3.2 per cent in February, while food inflation increased to 3.87 per cent.
Wholesale inflation accelerated sharply to 3.88 per cent from 2.13 per cent, reflecting faster transmission of energy and commodity price pressures.
The report also flagged transport inflation pressures, particularly airfare inflation, which rose in double digits at 14.2 per cent, driven by higher Air Transport Fuel prices.
Trade performance weakened in March, with merchandise exports falling 7.4 per cent year-on-year and 24 of 30 major export categories declining.
Exports to the United Arab Emirates and Saudi Arabia dropped sharply due to disruptions linked to the Strait of Hormuz blockade, which increased freight, insurance and logistics costs.
Remittances, which hit a record USD 135.4 billion in FY25, could also face downside risks if prolonged conflict weakens Gulf labour markets.
Unemployment rose to 5.1 per cent in March from 4.9 per cent in February, with the report noting stabilising labour conditions but weakening confidence in future job prospects, particularly in urban areas. (BVI)
