After PM Modi's caution, Finance Ministry says India's economic outlook has become 'more uncertain' due to West Asia war

India's economic outlook has become "more uncertain" due to the ongoing escalation and geopolitical tensions in West Asia, which have resulted in substantial energy disruption and logistical headwinds, the Finance Ministry's monthly economic review for March 2026 noted.

"The economic outlook has become more uncertain in the wake of recent geopolitical developments in West Asia, which have disrupted key energy and logistics channels and led to a tightening of global supply conditions," the report said.

The Department of Economic Affairs pointed out that India's economic prospects remained "robust" until February 2026, supported by strong demand and industrial activity.

"Prior to the onset of these developments, economic activity in India remained robust up to February 2026, with strong performance across both supply and demand-side indicators," the report added.

It highlighted that the conflict in West Asia has sparked fears of a dip in global growth and a surge in inflation due to disruptions in the Strait of Hormuz, through which 20 per cent of global oil transits.

The review said ship transits through the strait have nearly come to a halt, dropping to “one a week, as against 200–300 a week,” significantly tightening global oil and gas supplies and pushing prices higher.

The review stated that the conflict's impact would be felt through "supply disruptions to oil, gas and fertilisers, higher import prices, higher logistics costs, and a possible decline in remittances by Indians in Gulf countries."

On the positive side, the report mentioned that "strong growth in steel and cement production, alongside steady expansion in coal and fertilisers, underscores sustained momentum in infrastructure and construction activity."

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The financial sector remained supportive of economic activity, with bank credit growth rising 14.5 per cent year-on-year in February. The report also highlighted that "the overall flow of financial resources to the commercial sector grew by 33.2 per cent (YoY)."

However, "retail inflation rose to a 10-month high of 3.21 per cent in February 2026, driven primarily by a sharp uptick in food prices," the review stated.

Prime Minister Narendra Modi also flagged concerns in his recent address to Parliament. "The difficult global conditions caused by this war are likely to persist for a long time... we must be prepared to face the long-term impact," he said.

"This war has created a serious energy crisis across the entire world. The routine supply of petrol, diesel, gas, and fertilisers has been affected... India is making every effort to ensure uninterrupted supplies," he added.