![\"US-Iran](\"https:\/\/static.toiimg.com\/thumb\/msid-130104543,imgsize-112318,width-400,height-225,resizemode-4\/indian-economy.jpg\" "\\"RBI")
<\/div>\n<\/div>\n<\/div>\nThe Monetary Policy Committee (MPC), led by Reserve Bank of India<\/a> (RBI) governor Sanjay Malhotra kept the repo rate<\/a> unchanged and continued with the neutral stance while flagging risks to GDP growth<\/a> and inflation. The ongoing US-Iran war (two week ceasefire announced) and its impact on the global economy has been pointed out as a risk to India\u2019s growth prospects as well. \u201cBefore the outbreak of the conflict, India\u2019s macroeconomic fundamentals exuded confidence with buoyant growth and low inflation. Conditions turned adverse in March with the widening of the conflict zone and its intensification,\u201d Sanjay Malhotra said in his policy statement. He noted that the fundamentals of the Indian economy are on a \u2018stronger footing\u2019 at the current juncture than in previous crisis episodes as well as relative to many other economies. The central bank governor is of the view that this will provide the Indian economy with \u2018greater resilience\u2019 to withstand shocks.Also Read | RBI policy: Why did MPC keep repo rate unchanged? RBI governor Sanjay Malhotra explains<\/a>However, the downside risks to growth projections remain, especially in case of a prolonged West Asia conflict.<\/p>\n RBI governor Sanjay Malhotra pointed out five ways in which the Indian economy will be impacted by the ongoing conflict. He elaborated on the channels through which the shock can be transmitted. These are:<\/p>\n The RBI governor has cautioned that what has begun as a supply shock can potentially transform into a demand shock over the medium term if the restoration of supply chains is delayed.While GDP growth for FY 2025-26 is seen at 7.6%, the economy is likely to grow at 6.9% in FY 2026-27 as per RBI\u2019s initial assessment in the first monetary policy review of FY27. RBI has forecast that India\u2019s GDP will grow at 6.8% in the first quarter, 6.7% in the second quarter, 7% in the third quarter, and 7.2% in the fourth quarter of the current financial year.\u201cGoing forward, elevated energy and other commodity prices, as also shocks to availability of inputs due to disruptions in the Strait of Hormuz are likely to impact growth in 2026-27,\u201d Malhotra said in his statement. He noted that the government has taken \u2018proactive\u2019 steps to ensure supply constraints are eased for critical sectors.\u201cSustained momentum in the services sector, persisting impact of GST rationalisation, and healthy balance sheets of financial institutions and corporates should continue to support economic activity. Business expectations remain optimistic, and leading indicators point towards continued resilience in manufacturing and services sectors. Moreover, the Government\u2019s focus on scaling up domestic manufacturing in several strategic and frontier sectors augurs well for India\u2019s ensuing growth trajectory,\u201d he said.\u201cFurther escalation and wider spread of the conflict, heightened volatility in global financial markets and weather-related events, however, weigh on the domestic growth outlook. Risks to the baseline projections are tilted to the downside, with uncertainty remaining elevated due to the ongoing West Asia conflict,\u201d he added.<\/div>\n\n5 Point Impact of US-Iran War on Indian Economy<\/h2>\n<\/p>\n
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