<div id="readability-page-1"><div id="parent_top_div">By Anup Roy, Shruti Srivastava and Swati Gupta Surging oil prices and acute gas shortages are rippling through India’s economy as the Iran war drags on, disrupting industries and prompting analysts to cut growth forecasts while warning of rising inflation. India is among the economies most exposed to the West Asia crisis as it imports about 90 per cent of its crude oil and nearly half of its liquefied petroleum gas. About half of its crude and over three-fourths of LPG imports pass through the Strait of Hormuz, now effectively shut by Iran, pushing oil prices above $100 a barrel. The disruption has triggered a cooking gas crisis across households, hotels and restaurants, while industries that rely on LPG are shutting down operations. The shortages are raising concerns about a sharp slowdown in Asia’s third-largest economy just as it was recovering from the pandemic. Economists at banks including Goldman Sachs Group, Australia and New Zealand Banking Group and IndusInd Bank Ltd. expect slower growth due to reliance on imported oil. Goldman last week cut its 2026 growth forecast by half a percentage point to 6.5 per cent while ANZ sees expansion slowing to 6.5 per cent-6.8 per cent, in the fiscal year starting April from about 7 per cent. IndusInd Bank’s Gaurav Kapur sees a 30-basis-point hit with growth at around 6.5 per cent and warns weaker consumption could weigh on the recovery. <div> “The overall impact on growth will be more dampening than inflation,” Kapur said. “The government has enough fiscal space to absorb the oil price hit through excise duty cuts, but the hit on the industrial sector will impact growth.” The conflict thousands of miles away is already affecting daily life in India. Satyabhan Singh, 35, a food delivery driver, says his daily income has fallen by more than half to about 800 rupees ($8.65) as fuel costs rise. He now spends 300 to 400 rupees a day on petrol, meaning any increase in pump prices could wipe out what little he earns.</div> “The government should make some arrangements for us,” Singh said. “When there is no gas, they should ensure we can still earn enough to survive.” Gig work such as food delivery has become one of India’s fastest-growing sources of employment, with the workforce rising to about 12 million by March 2025 from 7.7 million in March 2021, a 55 per cent increase, according to the government’s Economic Survey. Gas rationing is disrupting key industries, from fertilizer and aluminum production to helium used in semiconductor manufacturing, raising the risk of a prolonged drag on growth. “All heating furnaces use LPG and, given the shortage and curbs on industrial use, factories have shut,” said Pankaj Chadha, chairman of the Engineering Exports Promotion Council. “In Gujarat, about 98 per cent of engineering firms are shut, while in Maharashtra around half the units have closed.” External Sector Risk Before the crisis, India’s economy appeared to be in a sweet spot. The government projected growth of as much as 7.2 per cent for the next financial year, while inflation was expected to stay close to the Reserve Bank of India’s 4 per cent target at least until September. Reserve Bank of India Governor Sanjay Malhotra had described the outlook as a “Goldilocks” scenario, with interest rates likely to remain unchanged for an extended period. The external sector has held up relatively well recently, though rising oil prices and a wider trade and current account deficits are emerging risks. “The external sector has emerged as the most at risk in this crisis” said Anubhuti Sahay, economist with Standard Chartered Plc. “While import cover is still about 10 months, the rupee has to act as the shock absorber.” Exports may suffer as disruptions hit nearly $200 billion of shipments to Gulf countries, potentially widening the current account deficit and putting pressure on the rupee, already near record lows of around 92.5 per dollar. The region is also critical for remittances, with about 10 million Indian workers sending nearly $50 billion home annually. Economists warn the inflation surge could undo years of efforts by the Reserve Bank of India, which brought price growth under control last year. The central bank had expected retail inflation to remain near its 4 per cent target until at least September. “Ripple effects would be felt across industries,” including restaurants and manufacturing units reliant on liquefied petroleum gas,” said Shumita Deveshwar, chief economist at GlobalData.TS Lombard. Inflation could accelerate to about 6 per cent by September or October, she added. </div></div>

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Surging oil prices and gas shortages due to the ongoing Iran war are negatively impacting India's economy, leading analysts to revise growth forecasts downward. India, heavily reliant on oil imports, faces a cooking gas crisis affecting households and industries. Economists predict growth could slow to around 6.5% for the fiscal year starting April, with inflation risks rising. The Reserve Bank of India's previous inflation targets may be compromised, with potential inflation reaching 6% by late 2023. The situation poses significant risks to India's external sector and overall economic recovery.

- Surging oil prices and gas shortages, driven by the ongoing Iran war, are negatively impacting India's economy, prompting analysts to reduce growth forecasts and raise inflation concerns.  
- India imports 90% of its crude oil and nearly half of its LPG, with disruptions at the Strait of Hormuz.  
- Key industries face significant challenges due to gas rationing, with economists predicting slower growth and potential inflation rising to 6% by autumn, undermining past efforts to control prices.

India growth forecasts cut, inflation risks rise as Iran war drags on