India Economic Outlook

BMI, a Fitch Group arm, has cautioned that the escalating conflict in the Middle East may dampen investment sentiment in India, partially offsetting the growth gains expected from upcoming trade agreements with the US and the EU.

Key Findings:

• BMI retained its FY2026/27 GDP growth forecast at 7 percent, citing relatively favourable policy uncertainty readings so far in 2026.
• Rising geopolitical risks, including the ongoing conflict in the Middle East, may discourage investment in India and offset the positive effects of trade deals on GDP.
• The conflict in the Middle East may directly shave up to 0.5 percentage points off India's GDP through higher energy costs.
• India imports approximately 88 percent of its crude oil requirements, making it particularly vulnerable to disruptions.

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Trade Developments:

• The new India-US trade framework agreed in early February, under which Washington is set to reduce tariffs to 18 percent as part of an interim deal.
• The US imposed 10 percent tariffs on all countries for 150 days starting February 24, and President Donald Trump has announced plans to raise the rate to 15 percent.
• India and the EU agreed on a free trade agreement (FTA) in January, which is expected to be implemented within a year after legal ratification.

Risk Assessment:

• The net impact of trade deals on India's growth trajectory will depend on how the Middle East conflict evolves and whether energy supply disruptions intensify in the coming months.
• BMI is assessing the evolving situation to quantify the potential impact on India's economy.

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