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The ongoing West Asia conflict has emerged as "the biggest test of India's resilience in recent years," with the "largest energy shock on record" creating spillover effects across freight costs, insurance costs, supply chains and fertilizer prices, according to a new report by S&P Global and Crisil released on Wednesday.
The report, titled "India Forward: Strategic Imperatives," said that energy price spikes and supply constraints triggered by the conflict are feeding into broader economic stress for India. According to the report, India's GDP growth is expected to moderate to 6.6 per cent in fiscal year 2026-27 from the earlier base case estimate of 7.1 per cent due to the external economic shock. It further said the conflict has brought renewed attention to India's energy and food security reforms linked to the country's long-term goal of becoming a developed nation under the "Viksit Bharat 2047" vision. Highlighting the economic risks, the report noted that India's fiscal position may come under pressure if elevated energy prices continue for a prolonged period. "India's post-COVID fiscal consolidation--reducing 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 report said. The report added that India is gradually shifting its policy focus from short-term crisis management to medium and long-term strategies as the conflict continues. "India's risk management focus" is moving "from immediate buffers to a focus on medium to long-term strategies," it said. On the energy front, the report said the current crisis could also serve as an opportunity for India to accelerate reforms and strengthen its energy security framework. "The current energy crisis underscores the need for a reliable and resilient energy system," the report said. However, it cautioned that while policymakers and regulators may push reforms faster, "the pace of change will be dictated by the Indian energy market's dependence on global energy flows and supply chains." The report also said that the ongoing shock could become an opportunity for India to "remove roadblocks" and address tactical issues to support its long-term economic growth and sustainability goals. (ANI)
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