How the war will hit India’s growth, and your wallet, Pg17

Key Highlights:

• The World Bank projects India's real GDP growth to fall below 7% in FY27 due to the Iran war.
• India updated its GDP estimation method on February 27, 2026, using a new base year of 2022-23.
• The previous GDP data series pegged India’s real GDP growth at 7.2% for FY24, 7.1% in FY25 and 7.6% in FY26.
• The US and Israel attacked Iran, leading to a 39-day war and a subsequent fragile ceasefire agreement.

Detailed Insights:

• The new GDP series initially showed real GDP growth above 7%, but the Iran war has negatively impacted projections.
• The World Bank now projects a 6.6% growth in FY27, assuming continued disruption in global energy supplies until the end of 2026.
• Private consumption, the largest driver of India's GDP, is expected to slow down due to higher prices impacting disposable incomes.
• Investment growth by companies is also projected to decelerate due to market uncertainty caused by the ongoing conflict.
• Government expenditure may face constraints due to existing high borrowings and rising subsidy bills from elevated oil prices.
• While exports are expected to maintain their growth rate, increased imports are likely to further dampen India's GDP growth.

Key Concepts Involved:

• GDP (Gross Domestic Product): The total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period.
• Real GDP: Economic output adjusted for the effects of inflation.
• Fiscal Year (FY): A 12-month period used for budgeting and accounting purposes.