IMF Warns India Growth Threatened by Middle East Conflict

Ranil Salgado, the IMF’s resident representative for India and Bhutan, identified the broadening regional conflict and potential monsoon failures as the primary downside risks. These factors prompted the IMF to trim its GDP growth forecast for India to 6.4%, down from the 6.5% projection issued in April. The recent collapse of U.S.-Iran ceasefire efforts and the subsequent closure of the Strait of Hormuz have pushed Brent crude prices toward $90 per barrel, placing immediate pressure on India’s public finances and currency.

Because India imports over 85% of its oil, the disruption to traditional supply lines from the Middle East has forced a rapid shift in procurement strategy. State-owned and private refiners are aggressively diversifying their portfolios, sourcing record volumes of Russian crude while turning to Brazil and Venezuela to bridge the gap. As long as the Strait of Hormuz remains restricted, analysts expect these elevated energy costs to continue acting as a significant drag on India’s broader economic expansion.