Moody’s Ratings has cut India’s real GDP growth forecast for fiscal 2026–27 to 6% from 6.8%, citing the fallout from the US-Israeli campaign against Iran and its disruption of global energy markets. The agency warned that heightened geopolitical risks would weigh on private consumption, industrial activity and gross fixed capital formation, while pushing inflation up — it now expects inflation to average about 4.8% in FY27, compared with 2.4% in FY26.
India, the world’s fourth-largest economy and a major oil and LPG importer, has been particularly exposed because the bulk of its fossil-fuel shipments traverse the Strait of Hormuz, a chokepoint affected by recent attacks and closures. With supplies constrained, New Delhi has prioritized household energy needs, reducing allocations for industry. Several sectors, including stainless steel and plastics, have reported production cuts as feedstock and fuel shortages and higher input costs bite. Analysts warn of a worsening energy import bill and the risk of a wider current account deficit if disruptions continue.
In response to supply shocks, Indian refiners have sourced crude from a broader set of suppliers. For the first time since 2019, India has taken Iranian crude after the US granted waivers, the petroleum ministry said, stressing that refiners retain commercial flexibility and that there are no payment hurdles for Iranian shipments. Reports that a tanker carrying Iranian crude diverted from India to China for payment reasons were called “factually incorrect” by the ministry; one US-sanctioned vessel did reroute mid-voyage, though officials did not cite a cause.
LPG supply has been a pressing concern. Live-tracking data showed India-bound LPG tankers, including the Mitsui-owned Green Sanvi carrying about 46,000 tonnes, crossing the Strait of Hormuz en route to Mumbai. These movements have provided temporary relief, but India — one of the world’s largest LPG importers that depends on imports for roughly 60% of household LPG — continues to face mounting shortages and price pressures. The government has issued emergency directives to manage supplies and engaged with Tehran to secure safe passage for Indian-flagged ships.
The energy-driven slowdown is unfolding alongside other domestic developments. Families of victims of the June 2025 Air India AI171 crash have written to Prime Minister Narendra Modi demanding release of cockpit voice recorder and flight data to clarify the cause of the disaster that killed 260 people. In Maharashtra’s Nashik district, nine relatives, including six children, died after their car plunged into an unprotected roadside well, highlighting infrastructure and safety gaps. In Kerala, Congress MP Shashi Tharoor’s convoy was reportedly stopped and his security personnel assaulted while he campaigned. Parts of north India also felt tremors from a 5.9-magnitude earthquake that struck Afghanistan, which killed at least eight people there.
Moody’s assessment underscores the near-term fragility of India’s recovery as energy shocks ripple through costs, consumption and investment. How quickly refiners restore stable supplies, how the government cushions households and industries, and whether geopolitical tensions ease will shape growth and inflation over the coming year.