India inflation rate: The ongoing tensions linked to the US-Iran conflict may have a deeper economic impact on India than previously expected. The Asian Development Bank (ADB) has warned that continued instability in the Middle East could keep global crude oil prices elevated for a long period, directly affecting India’s economy, inflation, and growth outlook.
According to a PTI report, ADB Chief Economist Albert Park said that the disruption caused by the prolonged Middle East crisis may continue to impact global supply chains. As a result, crude oil prices are expected to remain high in the coming years.
ADB has projected that average crude oil prices may stay around 96 dollars per barrel in 2026. For 2027, prices are expected to remain near 80 dollars per barrel. The economist said that compared to earlier forecasts, future price estimates are now significantly higher because of ongoing geopolitical uncertainty.
India, which depends heavily on imported oil and gas, is likely to face direct consequences from this rise in energy prices. Higher fuel costs generally increase transportation and manufacturing expenses, which can eventually affect the prices of essential goods and services across the country.
The ADB has also revised India’s GDP growth estimate downward. Albert Park stated that the impact of the West Asia crisis could reduce India’s GDP growth by 0.6 percentage points, bringing it down to 6.3 percent.
This marks a major shift from the bank’s earlier assessment. In April, ADB had projected that India’s economy would remain strong, estimating GDP growth at 6.9 percent for the current financial year. The institution had also expected growth to improve further to 7.3 percent in the next financial year due to strong domestic demand.
However, the latest assessment indicates that global instability and rising oil prices may weaken that momentum. Despite the downgrade, Park said that India’s economic growth is expected to return to a stable path in the following year.
Apart from GDP growth, inflation is now emerging as a major concern. ADB economists have warned that India may witness a sharp increase in inflation during the current financial year if crude oil prices continue to remain elevated.
The bank had earlier estimated India’s inflation rate at 4.5 percent. That projection has now been revised sharply upward to 6.9 percent. This indicates a possible jump of 2.4 percentage points in inflation, which could increase pressure on household budgets and business costs.
Experts at ADB pointed out that India’s heavy reliance on imported energy makes it especially vulnerable during periods of geopolitical conflict. Rising oil and gas prices not only affect fuel rates but also increase production costs in sectors linked to transportation, agriculture, and manufacturing.
The report also highlighted concerns related to agriculture and food prices. According to economists, higher fertilizer costs may force farmers to reduce usage, which could affect crop output. Lower agricultural production may eventually lead to reduced food supply later in the year.
Any fall in supply is expected to push food prices upward. Economists noted that the final impact on food inflation would largely depend on the extent of disruptions in global gas supplies and the duration of the ongoing Middle East tensions.
ADB further stated that the negative impact on growth caused by rising energy prices is not limited to India alone. Excluding China, the estimated 0.6 percent negative effect on growth is expected to be broadly similar across the wider Asian region as well.
The latest warning from ADB comes at a time when global markets are already closely watching geopolitical developments in West Asia. Analysts believe that continued uncertainty in the region may keep energy markets volatile and increase economic risks for oil-importing countries like India.
