There are moments in history when multiple crises converge, and their combined impact proves far more severe than each crisis in isolation. India today stands at precisely such a difficult crossroads. The war smouldering in West Asia, a weakening monsoon due to El Niño, declining industrial productivity, and a slowdown in international investment—taken together—have pushed the Indian economy into a complex bind. To understand the depth of this situation, one must look beyond headline numbers and examine the structural realities and geopolitical entanglements beneath them.
The strikes carried out by the United States and Israel against Iran in the latter half of February 2026 sent shockwaves through global energy markets, with repercussions extending far beyond a simple rise in oil prices. Shipping through the Strait of Hormuz virtually ground to a halt, disrupting nearly 20 percent of the world’s total oil supply. This posed a particular risk for India, which imports approximately 85 percent of its crude oil requirements, a substantial portion of which passes through this route. Shipping costs rose, insurance premiums spiked, and the rupee came under severe pressure. At one point, it fell to a historic low of 93–94 against the dollar, while major stock market indices declined by roughly 10 percent within a single month.
These developments were directly reflected in industrial production data. In March 2026, India’s Index of Eight Core Industries recorded a contraction of 0.4 percent, the worst performance in nineteen months. For the full financial year 2025–26, the combined growth of these sectors stood at just 2.6 percent—the weakest in five years since the COVID-19 pandemic. Given that these eight sectors carry a weight of nearly 40 percent in the Index of Industrial Production, their decline is far from sector-specific.
The most alarming figure was the sharp fall in fertiliser production, which dropped by 24.6 percent in March—the steepest single-month contraction since the current data series began in April 2012. Crude oil production fell by 5.7 percent, marking the seventh consecutive month of year-on-year decline. Coal output declined by 4 percent, and electricity generation contracted by 0.5 percent. According to ICRA’s Chief Economist, Aditi Nair, growth in steel and cement production—both closely linked to the construction sector—also weakened in March compared to February, indicating a slowdown in construction activity.
India’s exposure to the conflict extends beyond energy. Chief Economic Adviser V. Anantha Nageswaran has outlined four key transmission channels: disruptions in the supply of oil, gas, and fertilisers; rising import prices; higher freight costs; and a decline in remittances from Indians working in Gulf countries. This last factor often receives less attention, yet it is critical. Gulf economies contribute around 38 percent of India’s foreign exchange inflows. Any disruption there not only reduces remittances but also adds to domestic employment pressures as returning workers seek jobs at home.
Moody’s has identified India as one of the more vulnerable economies in the Asia-Pacific region. If the conflict persists, national income could fall nearly 4 percent below initial projections. EY has similarly warned that if disruptions extend into financial year 2027, India’s real GDP growth could decline by about one percentage point, while inflation may remain 1.5 percentage points above earlier estimates. This combination of slowing growth and rising inflation places the Reserve Bank of India in a difficult position: raising interest rates could further dampen growth, while lowering them risks fuelling inflation.
Alongside geopolitical pressures, climatic uncertainty adds another layer of risk. In April 2026, the India Meteorological Department (IMD) released its first long-range forecast, projecting monsoon rainfall at 92 percent of the long-period average—the first below-normal forecast in three years. The primary driver is El Niño, with conditions expected to develop in the central equatorial Pacific from June onward. Historically, such conditions are associated with reduced rainfall over the Indian subcontinent.
The IMD has indicated a 31 percent probability of below-normal rainfall this season and a 35 percent probability of deficient rainfall (below 90 percent of the long-period average), more than double the historical average of 16 percent. Private forecaster Skymet has offered a slightly more optimistic estimate of 94 percent, but it too assigns a 60 percent probability of below-normal rainfall in August. As August and September are critical months for kharif crops, rainfall during this period is particularly important. While a positive Indian Ocean Dipole and increased atmospheric moisture due to global warming could partly offset the deficit, these remain uncertain variables.
The economic implications of monsoon variability are substantial. Although the share of irrigated farmland in India has increased from 49.3 percent to 55 percent, about 45 percent of agriculture still depends entirely on rainfall. Pulses and oilseeds, largely cultivated in rain-fed regions, are especially vulnerable. A drop in their output would raise imports, fuel food inflation, and weigh on overall growth.
The convergence of these crises—higher fertiliser costs due to global conflict and reduced agricultural output from a weak monsoon—creates a double burden for farmers. Input costs rise even as yields fall. Nearly 60 percent of India’s farmers depend on the monsoon for the kharif season. When rural incomes decline, consumption weakens, affecting demand across the broader economy, including urban industries.
In response, the government has limited but necessary options. Increasing fertiliser subsidies would widen the fiscal deficit, while reducing excise duties on fuel would cut into revenues. Reports suggest a reduction in petrol excise duty by ₹10 per litre, placing additional strain on the exchequer. Such measures may provide temporary relief, but long-term resilience requires structural reforms.
There are, however, some mitigating factors. India produced a record 357 million tonnes of foodgrains in 2024–25, and the Food Corporation of India held over 60 million tonnes of wheat and rice in buffer stocks at the beginning of April 2026, providing a cushion for food security. Additionally, in financial year 2025–26, steel production grew by 9.1 percent and cement production by 8.6 percent, indicating continued momentum in infrastructure development. Even so, these strengths coexist with significant vulnerabilities.
The broader implication of recent data is clear: India is entering a period of heightened economic risk. The kharif sowing season lies ahead, global supply chains remain strained, and there is no clear resolution in sight for the West Asian conflict. If fertiliser and energy prices remain elevated in the coming months, the combined pressures of rising input costs and food inflation will disproportionately affect ordinary citizens.
The Chief Economic Adviser has already cautioned that India’s projected growth rate of 7–7.4 percent for 2026–27 faces considerable downside risks. The International Monetary Fund has similarly noted that the economic effects of the conflict are already visible and may persist even after hostilities subside. Chatham House has warned that prolonged conflict could push oil prices to as high as $130 per barrel, a scenario that would significantly worsen India’s economic outlook.
In confronting this multi-layered crisis, reactive policymaking will not suffice. Proactive planning is essential. Measures such as fertiliser stockpiling, improved water management, strengthened rural employment programmes, efficient food distribution, and careful monetary policy to stabilise the rupee must be pursued in tandem. As favourable conditions of recent years—marked by relatively low fuel prices and good monsoons—fade, policymakers face a critical test. Economic resilience is not built in easy times; it is demonstrated through effective and timely action in periods of stress.
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*Independent writer
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