Impact of West Asia crisis! India’s economic growth rate decreased, ICRA released GDP estimate for FY26-27

New Delhi: Rating agency ICRA has reduced India’s economic growth forecast for the financial year 2026-27 to 6.2 percent. The rating agency had earlier estimated it to be 6.5 percent. Growth rate estimates have been reduced in view of high crude oil prices due to the West Asia crisis. ICRA has estimated GDP growth for fiscal year 2025-26 at 7.5 percent, marginally lower than the National Statistical Office (NSO)’s second advance estimate of 7.6 percent.

ICRA Chief Economist Aditi Nair said, “Given the price volatility due to the ongoing standoff in West Asia, the average crude oil price is now estimated at $95 per barrel in FY 2026-27, whereas our previous estimate was $85 per barrel.” As a result, we have reduced our GDP growth forecast (at constant 2022-23 prices) for FY 2026-27 to 6.2 per cent from 6.5 per cent earlier. The rating agency also said that GDP growth rate in the fourth quarter of 2025-26 is expected to fall to a three-quarter low of 7.0 percent. In the third quarter it was 7.8 percent. GDP growth is expected to decline due to slow growth in the industrial and service sectors. However, marginal improvement in the performance of the agriculture sector is expected.

“However, industrial gross value added (GVA) growth was impacted in the quarter given slow growth in manufacturing volumes, decline in exports and early signs of margin pressure due to the West Asia crisis,” Nair said. “As a result, we estimate GDP growth to slow to a three-quarter low of seven per cent in Q4 2025-26, which is lower than NSO’s estimate of 7.3 per cent for the quarter.”

India’s merchandise exports declined by 2.8 percent in the March quarter of 2025-26 due to the slowdown in global growth and shipping problems caused by the West Asia conflict. There was a slight increase of 1.4 percent in the December quarter.