New Delhi, May 6 Energy price spikes and supply constraints from the Middle East war are feeding into broader economic stress for India and marks the largest energy shock on record for India, a report said on Wednesday.
The report from S&P Global India said India’s post‑COVID fiscal consolidation such as cutting the fiscal deficit from 9.2 per cent of GDP in FY2021 to 4.4 per cent in FY2025‑26 — now faces its toughest challenge.
"The Middle East war represents the biggest test of India’s resilience in recent years, with the largest energy shock on record triggering spillovers into freight and insurance costs, supply chains and fertilizers," it said.
The conflict has put a spotlight on energy and food security reforms linked to India’s goals of Viksit Bharat by 2047, the report added.
The current energy crisis underscores the need for a reliable and resilient energy system. While policymakers and regulators can accelerate the reform agenda, the pace of change will be dictated by the Indian energy market’s dependence on global energy flows and supply chains.
The shock could be an opportunity to address tactical issues and remove roadblocks, to help achieve its longer-term economic growth and sustainability goal, it added.
The government and other public stakeholders must balance enhancing domestic growth drivers, attracting foreign capital and improving external market access for India to achieve developed country status by 2047.
The Indian economic outlook for fiscal 2026 and beyond will be influenced by global tariff shocks and how domestic buffers and policy levers can be shaped to provide a cushion.
A recent S&P Global report forecasted sustained expansion in both manufacturing and services in fiscal 2026, cementing India’s pole position among major economies.
India’s GDP growth is expected to moderate to 6.6 per cent in fiscal year 2026-27, from a base case estimate of 7.1 per cent, Crisil Ratings said in a recent report.
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