April 9, 2026
India among fastest growing major economies despite Iran war — World Bank
India is likely to remain among the world’s fastest growing major economies despite the war in Iran, the World Bank said, but warned that the country could face significant risks as the conflict fans inflation concerns.
The economy is insulated to a degree by strong macroeconomic fundamentals and policy buffers, the World Bank said.
“Substantial foreign reserves, low inflation, predominantly rupee-denominated public debt, a healthy financial sector, and trade diversification efforts play a major role in providing resilience from external headwinds,” it said.
That said, India’s reliance on energy imports from the Gulf leaves inflation and fiscal position vulnerable if the conflict were to extend much longer.
“A disrupted labor market in Gulf economies (the origin for nearly 38% of India’s remittance inflows) would lower the secondary income surplus. These factors would put additional pressure on the rupee,” the report said.
“Fiscal risks would also rise if measures to limit fuel price pass-through to consumers—such as excise rate cuts and increased subsidies—are scaled up,” it said. The report added that while policies would mitigate the risk, persistently high global energy prices would eventually lead to higher retail inflation and weigh on domestic demand.
The US-Israel war with Iran has constricted the flow of oil and gas to India, which imports the majority of its energy needs. Gas prices at home have marginally increased but the government and its oil companies have absorbed much of the impact so far.
On the other hand, the Indian rupee has weakened against the dollar to become Asia’s worst performing currency.
The World Bank’s India economist Aurelien Kruse projected India retail inflation at 4.9%, reflecting higher food and energy prices. He was speaking at a press conference in New Delhi after the release of the report.
India’s central bank left interest rates unchanged on Wednesday and projected retail inflation for the year at 4.6%. The Reserve Bank of India expects the nation’s economy to grow at 6.9% in the financial year 2027, while the World Bank expects a 6.6% growth rate in the same time period.
