India flags slower growth, wider deficit as Iran war raises the stakes for New Delhi

Core Viewpoint - India's growth forecast of 7.0%–7.4% for the financial year ending March 2027 is under considerable downside risk due to rising energy costs and supply-chain disruptions linked to the Iran war [1][2]. Economic Impact - The conflict has disrupted goods movement through the Strait of Hormuz, which carries 20% of global oil, leading to increased energy and freight costs, thereby straining supply chains [2]. - The trade deficit is expected to rise significantly in the next financial year, contributing to a widening current account deficit [2]. Government Response - The Indian government has not yet passed rising energy costs to consumers, recently cutting central excise duties on petrol and diesel by 10 rupees ($0.11) per liter to prevent price increases [4]. - Duties on exports of diesel and aviation turbine fuel have been raised to ensure adequate domestic availability, although this may negatively impact tax revenues [5]. Future Projections - A note from global brokerage Nomura indicates that if crude oil prices remain elevated, pump prices will likely increase after state elections scheduled for April, with final results on May 4 [6].