The World Bank stated on Thursday that India has "ample" buffers against the West Asia issue, but a prolonged conflict offers a downside risk.
"Risks are tilted to the downside as prolonged periods of elevated oil prices can significantly impact the Indian economy, but risks are cushioned by ample buffers," World Bank Lead Economist for India Aurelien Kruse said while presenting India Development Update. These buffers include a net energy import share of 2.8-3 percent of GDP, foreign exchange reserves sufficient to cover more than ten months of imports, low inflation, and a small current account deficit, among other things.On Wednesday, the World Bank upped India's current fiscal growth forecast by 30 basis points to 6.6% from its prior estimate of 6.3%, however this still lower than the previous fiscal. According to the South Asia Economic Update report, India's growth is expected to increase to 7.6% in FY26 from 7.1% in FY25, owing to robust domestic demand and export resilience.
Kruse compared the current scenario to a "earthquake," saying, "But India has the right structure of houses, and fire trucks are coming." Furthermore, he stated that India remained the world's fastest-growing big economy in FY26, despite suffering some of the highest tariffs on its exports globally.

"India showed very strong performance and resilience," Kruse stated. All of the predictions have assumed an oil price of $90-100 per barrel in FY27 in order to calculate growth rates.
Congratulations to Centre!
The World Bank praised the Indian government's policy for dealing with the energy crisis caused by the West Asian conflict. "The authorities have struck the right balance between taking measures to manage supply without resorting to massive rationing or restrictions, as well as attempting to alleviate initial volatility by keeping retail oil prices relatively constant in order to avoid a very sharp, non-linear adjustment that would have been more detrimental than beneficial in the short term. Having said that, the risks are clearly huge. They're skewed to the negative," Kruse explained.

Sebastian Eckardt, World Bank Regional Practice Director for South Asia (Prosperity), remarked that good measures, such as the EU FTA and new labour reforms, are supporting India's strong growth momentum. Despite global challenges, "we do see India and the region, continuing to be a very strong, performed gross performing region compared to other emerging markets across the world," he stated.
Rising deficits
According to the Bank, India's current account deficit for FY27 is projected to reach 1.8% of GDP due to increased energy imports. The budget deficit of the general government (Centre and States combined) is expected to slightly grow to 7.6% of GDP, up from 7.3% in the absence of the conflict.Higher energy prices will lead to increased spending on fertilisers and fuel subsidies, while excise tax reduction would limit income growth. The Bank predicts that the fiscal deficit would steadily decrease over the medium term.