War-Induced Rise in Energy Prices May Reduce India's Output By 4%, Says Moody’s Analytics
· Free Press Journal
The West Asian war could be the perfect storm for the Indian economy as rising energy prices, a depreciating rupee, and inflation pose to dent the growth trajectory of the country.
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According to a report by Moneycontrol citing the latest Asia-Pacific outlook by Moody’s, India could be among the worst-hit economies in the region due to its dependence on imports to meet energy requirements.
The country could face up to a 4 percent decline in production from its base trajectory if oil prices remain elevated. According to Moody’s, India, South Korea, and China could face the biggest impact of the West Asian war.
Markets Brace For Volatile Week Amid West Asia Crisis, Crude Oil Near $100 And ₹88,000 Crore FII Outflows In FocusIt warned that rising energy prices could lead to inflation, bigger trade deficits, and reduced consumption.
“India and China face sizeable damage given their dependence on oil and gas imports from Gulf economies caught up in the conflict,” the report cited Moody’s Analytics note as saying in its latest Asia-Pacific outlook.
According to the credit rating agency, growth in the Asia-Pacific region was already expected to slow to 4 percent in 2026 from 4.3 percent in 2025, with further moderation likely thereafter.
Geo-Political Tensions May Hit Economy And Road Transport Sector, Warns Industry LeaderThe risk is bigger for India, which relies heavily on imports for its energy needs compared to developed Asian economies that have strong strategic reserves.
The report noted that the government was making efforts to cushion the immediate impact of the war, but a prolonged crisis could weigh on the country’s economic growth.
However, India would continue to remain the fastest-growing major economy in the world. The global rating agency has projected growth of 7.5 percent in 2026 compared to 7.8 percent in the previous year.
GDP is expected to expand at a slower rate of around 6.5 percent in 2027. The report comes as the government has expressed concerns about the impact of the war on India.
In his Lok Sabha address on Monday, Prime Minister Narendra Modi said that the Gulf region was important for India in terms of trade and people. He assured that the government would provide essential commodities like fuel and fertilisers to minimise the impact of the war.