Moody’s Report: Middle East crisis will also affect India, inflation will increase, GDP growth rate will fall.

New Delhi, 5 April. Moody’s Ratings has reduced India’s economic growth forecast for the current financial year 2026-27 to six percent from 6.8 percent. The rating agency has said that due to the Middle East crisis, the pace of India’s growth will decrease and the risk of inflation will also increase. In its credit outlook report on India, Moody’s said the prolonged disruption would lead to shortages for households, especially cooking gas (LPG), in the coming days. Apart from this, the cost of fuel and transportation will increase. In such a situation, since India is dependent on imports for fertilizers, its impact will extend to food inflation. The region caters to about 55 percent of India’s crude oil imports and more than 90 percent of its liquefied petroleum gas (LPG).

Moody’s said, “Although inflation remains under control, geopolitical risks have turned the inflation outlook to the upside. Moody’s estimates that average inflation will rise to 4.8 per cent in 2026-27 from 2.4 per cent in 2025-26. Moody’s believes that with inflation risks rising again and growth remaining strong, Moody’s believes that with the policy rate repo in 2026-27 “It will either be kept stable or increase gradually, depending on the duration of geopolitical tensions and its impact on food and fuel inflation.”

According to a March 31 report of Moody’s, seen by PTI, “Given the impact of the ongoing military conflict in West Asia on India’s economy, we estimate that the real gross domestic product (GDP) growth rate will decline to six per cent in 2026-27. The rating agency had earlier estimated it to be 6.8 per cent. Weak private consumption, slowdown in industrial activity, decline in gross fixed capital formation, rise in prices and cost of living will impact India’s economy,” the report said. This increase will affect India’s growth rate.” Last month, the Organization for Economic Co-operation and Development (OECD) had estimated that India’s GDP growth rate will decline from 7.6 percent in 2025-26 to 6.1 percent in 2026-27.

Apart from this, EY’s ‘Economy Watch’ report states that if the West Asia conflict continues till 2026-27, India’s real GDP growth rate will decline by about one percent in the current financial year while retail inflation will increase by about one and a half percentage points. Domestic rating agency ICRA estimates that India’s growth rate will decline to 6.5 percent in 2026-27.

The agency estimates that exports of goods and services will remain largely stable. At the same time, import of goods will increase amid high commodity prices. This will increase India’s current account deficit (CAD). Moody’s said that the remittances sent to the country by Indians living in other countries will also be affected due to this crisis. The reason for this is that 40 percent of such flows come from Gulf countries.