By Shivaji Sarkar
The Iran war is hitting many countries beyond they could have imagined. The IMF forecast has subdued global growth. India is no less a sufferer. IMF makes India slip to sixth largest economy as rupee sinks, oil prices hit inflation high and a combination of factors make IPO’s lose steam and BSE Sensex thaws.
The IT services revenue declines 0.3 per cent in financial year 2026 and companies like Wipro buys back its shares worth Rs 15000 crore at Rs 250 per share. Many IT and other companies are laying off staff as even US companies are wary of President Donald Trump’s fresh tariff plan under Section 301, where the US Trade Representatives launch two investigations. Ford to Delta and Dell fear fresh duties will make it harder for them to compete amid increased cost to consumers. Not a favourable sign for Indian exports.
The IMF warned that a prolonged conflict could heighten financial instability, requiring carefully calibrated policy responses. It has downgraded global growth forecast for 2026 from 3.3 to 3.1 per cent, due to the war. It recalibrated global Indian position from fifth largest economy to sixth with GDP at current prices estimated at $ 3.76 trillion against the UK’s $ 3.7 trillion. The last year India’s GDP went up to $ 3.92 trillion and at $ 4 trillion the UK overtook it.
However, The IMF projects India’s FY27 GDP growth at 6.5 per cent, remaining the fastest-growing major economy. But warns that high oil prices pose risks to inflation (seen at 4.7 per cent), India’s strong domestic demand keeps growth above 6 per cent.
On the contrary, Goldman Sachs has slashed India’s 2026 GDP growth forecast to 5.9 per cent (from an earlier 7 per cent projection) due to risks from the Iran conflict, high oil prices, and currency depreciation.
Goldman Sachs downgraded Indian equities to “market weight” and cut the Nifty 50 12-month target, citing less attractive risk-reward ratios. Increased Brent crude oil prices (expected to average high in March/April 2026) are raising inflationary pressures and widening the current account deficit to 2 per cent of GDP.
The calculations are more complex as a new statistical series takes over and the rupee continues to slide. In rupee terms at current prices, GDP was pegged at Rs 318 lakh crore in 2024 and rose to Rs 347 (9 per cent) and to increase to Rs 385 lakh crore (11 per cent) this year.
The IMF sees the Indian rupee depreciating from Rs 84.57 to a dollar in 2024 and Rs 88.48 last year and Rs 92.59 this year. It has not taken into calculation its latest fall to Rs 95.04 though for a while. In contrast, the IMF data show that the British pound appreciated against dollar for keeping off the Iran war and sustained growth
Meanwhile, Reuters reports that Indian oil refiners are now paying for Iranian oil using Chinese yuan. Is Yuan emerging as new currency?
GDP Rising?
While the government was expecting India to overtake Japan to the fourth largest economy, it will have to wait longer.
The statistics can be deceptive. The impact of the new stats series is yet to be estimated. The GDP as a measure for progress may also be elusive. The GDP growth may not indicate actual progress though statistical graph increases in a cumulative manner.
Concerns over India’s GDP data stem from a perceived gap between headline growth and ground realities, with critics arguing that expansion may be more “statistical” than real. A 2026 study by Arvind Subramanian, Abhishek Anand, and Josh Felman suggests GDP growth may have been overstated by 1.5–2 per centage points annually between 2012 and 2023 due to methodological issues.
Key doubts arise from weak manufacturing performance and limited job creation, which do not match high growth claims. GDP estimates may also understate the impact of shocks like demonetisation, GST, and COVID-19 on the vast unorganised sector. The use of Wholesale Price Index (WPI) rather than the Producer Price Index (PPI) for inflation adjustment, reliance on the MCA 21 corporate database, and divergence from indicators like credit growth, exports, and electricity consumption further reinforce concerns about overestimated growth.
The Ministry of Corporate Affairs’ MCA21 database has been questioned, as it may use limited, unreliable data for smaller firms, painting a rosier picture of company performance.
Various flip-flop policies on carbon, energy, diesel, battery-toy-tech cars that turn junk in four years, dependence on imported fuel and little progress of alternate energy system with 20 per cent efficiency, and ship-to-stove LPG/LNG dependence has thrown the country into a combination of mal-distribution and black-market abyss. It poses threat to India’s strategic concerns.
GDP Does Not Count
GDP counts output not reality. GDP doesn’t count unpaid domestic work. Women in India contribute an estimated 7.5 per cent of GDP in unpaid labour — childcare, cooking, cleaning, elderly care. If a family hires a cook, GDP goes up. If the mother does the same work, GDP doesn’t move. The work is identical. The counting isn’t.
GDP doesn’t subtract environmental damage. India lost 1.36 million hectares of tree cover between 2001 and 2023. Mining, urbanisation, infrastructure. Every tree cut generated economic activity that showed up in GDP. The long-term cost — flooding, soil erosion, water table collapse, health impact — doesn’t get subtracted. The destruction is counted. The consequence isn’t.
Nor does GDP distinguish debt-driven spending from real prosperity. India’s household debt crossed 42 per cent of GDP. Personal loans under Rs10,000 have a 44 per cent spike in defaults. When a family borrows to buy a phone or pay a hospital bill, that spending adds to GDP. When they default, the default doesn’t subtract from it.
There are alternatives. The UNDP’s Human Development Index measures life expectancy, education, and income together. Bhutan uses Gross National Happiness. The OECD has a Better Life Index covering housing, jobs, health, environment, safety, and life satisfaction. India publishes none of these as a primary measure. GDP is useful, but on its own it cannot show whether lives are truly improving.
Lower US tariffs on Indian goods and resilient domestic demand are cushioning growth. Even against a slowing global economy hit by energy disruptions, India is still expanding at more than twice the world average. But the outlook isn’t risk-free—if the conflict drags on, financial instability could rise, demanding careful, calibrated policy responses.—INFA
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