Gulf conflict puts FY27 growth at risk

Economic Outlook - India's economic outlook is under increasing pressure due to the West Asia conflict, with economists warning of a potential 50-60 basis point hit to FY27 growth [11] - Ratings agency ICRA has lowered its FY27 growth forecast to 6.5% from 7.1%, assuming an average crude price of $85 per barrel, compared to an earlier estimate of $70-75 [2][11] - The Organisation for Economic Cooperation and Development (OECD) has also revised India's FY27 growth forecast down to 6.1% from 6.2% due to global uncertainty [7][11] Sector Impact - Elevated crude prices, supply disruptions, and rising commodity costs are expected to negatively impact sectors such as chemicals, steel, cement, textiles, paints, tyres, airlines, processed food, hospitality, and fertilisers [11] - If global crude prices average $100 per barrel, GDP growth could moderate to 6.6% in FY27, further affecting these sectors [3][11] Inflation and Monetary Policy - The conflict has driven up prices across a wide range of raw materials, increasing the likelihood of higher inflation, with the input price index reaching a near four-year high of 59.2 in March [9][11] - Economists expect wholesale and retail inflation to average around 4-5% each in FY27, with wholesale inflation rising 2.13% in February and retail inflation at 3.21% [9][11] - The Reserve Bank of India's monetary policy committee (MPC) may consider an earlier than expected policy rate hike if supply disruptions persist, as domestic inventories run down [8][11]