Iran-US War: If Middle East tensions continue to drag on, crude oil prices could rise, threatening to increase inflation and reduce GDP growth in India. According to the ADB, this will directly impact the pockets of ordinary people.

Inflation will rise – GDP will fall

Iran-US War Impact: Rising tensions in the Middle East are impacting the global economy, and now India may also be affected. The Asian Development Bank (ADB) has warned that the ongoing crisis in the Middle East could cause crude oil prices to remain high for a long time. This could lead to increased inflation in India and impact economic growth.

Crude oil prices may remain high

According to a PTI report, ADB Chief Economist Albert Park said that if the Middle East crisis continues for a long time, it will have a major impact on the supply chain and could lead to a rise in crude oil prices. According to him, the average price of crude oil could reach $96 per barrel in 2026, while it could remain around $80 per barrel in 2027.

India's GDP growth will be affected

Albert Park stated that this crisis will also impact India's economic growth rate. The ADB estimates that India's GDP growth could decline by 0.6 percent, falling to 6.3 percent. It's worth noting that in April, the ADB had projected India's GDP growth for the current financial year to be 6.9 percent, while it was expected to reach 7.3 percent in the next financial year. However, the silver lining is that the Indian economy could return to normal next year.

Can inflation increase?

The impact of rising crude oil prices won't be limited to GDP alone. Inflation in India could also rise. ADB's inflation forecast for the current financial year was originally 4.5 percent, but it has now been raised to 6.9 percent. This means inflation could rise by up to 2.4 percent.

Why will inflation increase?

India imports a large portion of its oil and gas needs from abroad. Therefore, if oil and gas prices rise in the international market, it directly impacts India. Furthermore, rising gas prices will increase the cost of fertilizers and manure, which will increase the cost of production for farmers.

If farmers use less fertilizer, crop production could decline. This will directly impact food prices. This means that prolonged tensions in the Middle East will directly impact inflation in India, impacting the pockets of ordinary people.