The Indian economy, which recorded a robust 7.8% growth in the October to December 2025 quarter, is now facing a significant slowdown. Economists widely anticipate that the West Asia conflict, which commenced on February 28, will pull down India's Gross Domestic Product (GDP) growth to approximately 7% for the fourth quarter of fiscal year 2026 (January-March 2026).
This geopolitical event swiftly led to disruptions, including the closure of the Strait of Hormuz and attacks on crucial energy production facilities in the region. These developments have, within weeks, impacted India's energy requirements and foreign trade, contributing to the projected economic deceleration. The full fiscal year 2026 GDP growth is now estimated to fall below 7% as the domestic economy registers the complete impact of the conflict.
Official Data and Expert Projections
The Ministry of Statistics and Programme Implementation is slated to release the official fourth-quarter GDP estimates, along with provisional GDP estimates for FY26, on June 5.
India Ratings and Research Outlook
India Ratings and Research has pegged India's GDP growth at 6.7% for Q4 FY26, with the full fiscal year 2025-26 estimated at 7.6%. Looking ahead, the agency projects FY27 GDP growth at 6.7%, with Q1 FY27 growth also around this figure. Their analysis highlights that elevated fuel and food prices, driven by the West Asia conflict's uncertainty, coupled with the anticipated impact of an evolving El Niño phenomenon on agriculture from mid-2026, will collectively dampen GDP growth in FY27.
“A USD10/bbl increase in crude oil prices could reduce GDP growth by 44bp, while a 10% reduction in capex could lower GDP growth to 6.0%,” stated Megha Arora, Director—Economics, India Ratings & Research. The agency's baseline forecast assumes crude oil prices at USD95/bbl, with the El Niño impact expected to manifest in the second quarter of the current fiscal.
ICRA and SBI Research Estimates
Rating agency ICRA has estimated Q4 FY26 GDP growth at a three-quarter low of 7%, with the full FY26 GDP growth projected at 7.5%. ICRA noted that a slower expansion in the industrial sector (over 7.3%) and services sector (over 8.5%) is expected to have moderated overall GDP growth, even as the agriculture sector's performance likely improved slightly to about 2.1%. ICRA, assuming crude oil prices average around $95/bbl this fiscal, has lowered its FY27 GDP growth forecast to 6.2%.
Separately, an SBI Research Report has estimated Q4 FY26 real GDP growth closer to 7.2% and nowcasts the full year 2026-27 GDP growth rate at 6.6%. For FY26, SBI Research had earlier projected GDP growth at 7.5%.