Iran-Israel War and Oil Price Volatility Could Cut India's GDP Growth By Up To 1% Gita Gopinath, former chief economist of the International Monetary Fund and Harvard professor, warned that the ongoing conflict between Iran and Israel is already affecting India's GDP growth. Speaking to NDTV, she highlighted how rising oil prices could shave off between 0.5 and 1 percentage point from India's economic expansion. The IMF had previously revised its India GDP forecast for fiscal year 2026 to 7.3%, citing strong momentum and third-quarter performance. However, Gopinath cautioned that a significant drop in oil prices could undermine this projection. She noted that if Brent crude oil averages around $85 per barrel for the rest of the year, it could reduce India's growth by half a percentage point. At $100 per barrel, the impact could be nearly one percentage point. Gopinath emphasized that the government's handling of fuel subsidies plays a critical role in mitigating inflationary pressures. She pointed out that Indian fuel prices have remained stable since most of the oil price shock has been absorbed by oil companies. However, she warned that this is not a sustainable solution. "If oil stays at current prices for a few more weeks, prices should go up even in India," she said, adding that prolonged high oil prices could strain the fiscal deficit and balance of payments. The crisis has also raised concerns about food inflation, as Gopinath noted that food prices typically lag energy costs by six months. She highlighted the impact on fertiliser prices, which are heavily reliant on Gulf imports. Around 63% of India's nitrogen fertiliser, including urea and ammonia, and 32% of di-ammonium phosphate, comes from the Gulf, making the region a critical supplier.#iran #israel #strait_of_hormuz #imf #gita_gopinath
