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India's economic growth for the 2027 fiscal year is expected to reach approximately 6.9 per cent, a decrease from the previous projection of 7.2 per cent, as energy supply disruptions begin to weigh on industrial production.
An ICICI Bank report stated that the economic impact will likely remain concentrated in March and April, with a gradual easing of supply constraints anticipated in the following months. "We expect impact on economy to be concentrated in month of March and April with gradual easing of supply in coming months. This should have an impact on growth in Q4FY26 and Q1FY27. Given impact is limited in the two quarters, we expect FY27 growth at around 6.9% as against 7.2% earlier," the report said. The revision in growth estimates followed a significant change in the global energy landscape. The report explained that the "limited impact on growth is on account of implicit assumption that oil prices settle around USD 85/bbl. With supply lines improving in coming weeks in comparison to our earlier scenario of oil prices averaging USD 70/bbl." The report noted that this adjustment reflected the immediate pressure of rising costs, even as supply lines show signs of stabilization in the near term. Prior to the onset of recent geopolitical tensions, the Indian economy maintained a strong trajectory, posting a year-on-year growth of 7.8 per cent in December 2025. The report, citing data from January and February, further suggested that underlying economic activity was robust. "However, since the advent of war, the supply of energy products has been impacted in particular LNG and LPG. Flash manufacturing PMI for March is already showing an impact with the index decelerating to 53.8 from 56.9 in the previous month," the report stated. Industrial sectors are currently bearing the brunt of these energy shortages. While authorities have prioritized meeting household demand for LNG and LPG, there has been a necessary cutback in supply for industrial applications. This reduction is "likely to impact production in sectors such as fertilizer, ceramics, restaurants, metals and glass among others." The report noted that a similar trend occurred in 2022, when high gas prices caused manufacturing activity to slow by 1.7 per cent in FY23, down from 10 per cent in the preceding year. Trade challenges also factor into the revised outlook. Before the current conflict, US tariffs on Indian goods were considered the primary headwind, putting pressure on overall exports despite efforts toward diversification. The situation is now complicated by logistics in the Middle East. The report warned that "there is likely to be an impact on exports given as much as 15% of India's exports go to GCC countries and some of the shipments could be impacted because of closure of Strait of Hormuz." Most of this impact is likely to be felt in Q4FY26 and Q1FY27 when supply constraints continue to affect production levels. (ANI)
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