West Asia Tensions Cloud India's Economic Outlook, DEA Warns

India’s economic outlook has grown more uncertain as geopolitical tensions in West Asia disrupt global energy and logistics channels, the Department of Economic Affairs’ March 2026 Monthly Economic Review notes. The report says India's economy was robust up to February 2026, supported by strong demand and broad industrial activity, with steel and cement leading growth and coal and fertiliser output expanding—signs of continued momentum in infrastructure and construction.

Tensions in the region have tightened global supply conditions, especially for energy routes. The impact has been felt through the Strait of Hormuz, where ship transits have dropped to about one a week, versus 200-300 a week previously, tightening oil and gas supplies and pushing prices higher. The review highlights multiple potential channels through which India could feel the pinch: disruptions to oil, gas and fertiliser supplies, higher import prices, elevated logistics costs, and a possible dip in remittances from Indians working in Gulf countries.

Despite these external uncertainties, India’s domestic industrial sector remains resilient. The report notes continued strength in steel and cement production and steady expansion in coal and fertiliser output, pointing to sustained momentum in infrastructure and construction activity. On the policy side, the government is taking proactive steps to shield citizens, farmers, and families from economic strain and to maintain stability in energy and supply systems, even as global conditions remain volatile.

Overall, the review suggests that domestic demand and supply indicators held up well through February 2026, offering reason for cautious optimism about continued growth in infrastructure and construction, even as the external environment remains unsettled.

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