India today stands before a bend in the road, after a phase of steady economic growth with low inflation in recent years. Its economy was credited to enjoy a goldilocks phase when the global economy was wrestling with slowdown and inching inflation in the rich world. Even when the geopolitical tensions and the backlash of tariff trauma triggered by the US President Donald Trump marred India’s last year fiscal year scenario, the budget for 2026-27 presented on February 1 this year laid out a spate of short- and long-term measures with the primary focus on public infrastructure. When the going seems smooth, there came the gloomy bolt on March 1 of the Israel-Iran conflict with the US on the side of Israel. Since then, there seems little lull in the tensions and the attendant disruptions to the seamless movement of oil and gas cargoes across the sea. For India, which is dependent more than 90 percent on crude and liquefied petroleum gas import for domestic and industrial consumption and fertilisers to a considerable extent, the bend bodes tough choices, given its macroeconomic vulnerabilities.
For once, the US unilateral blockade of the Iranian ports with tantalising ceasefire meant India remains tethered to supply chain disruptions to a longer period than envisaged. The Paris-based International Energy Agency (IEA) in its just-released quarterly gas market report highlighted that the disruption to shipping through the Strait of Hormuz since the start of March has created “unprecedented uncertainty, removing close to 20 percent of global LNG supply from the market and triggering sharp price increases across key importing regions”. Globally LNG production fell by 8 percent year-on-year with a steep drop in exports from Qatar and the United Arab Emirates only partially offset by higher output from other regions. The crisis is likely to have ramifications for the medium-term outlook. IEA reckons that damage to LNG liquefaction infrastructure in Qatar is set to reduce projected supply growth and delay the effect of the anticipated global LNG expansion wave by at least two years. To make matters morose, global oil reserves fell at a record pace in April as the conflict in West Asia disrupted supplies and heightened the threat of a further sharp upsurge in prices. S&P Global Energy reckoned that last month stockpiles of crude fell by two hundred million barrels or six million barrels a day! The price of benchmark Brent crude hovered above $110 a barrel early this month.
Even as the IEA report said several Asian countries are implementing fuel-switching and demand-side measures to limit gas use amid the supply shortage, the fact remains fuel shortages across the country need fixing. It is no consolation and comfort that “India remains an oasis of energy security, availability and affordability” when reality is painfully harsh to numerous households, finding the fuel or gas to
A recent study by the German think tank Hinrich foundation, concedes that India’s GDP (gross domestic product) growth pulls ahead to outpace all major economies through 2026. With global growth slowing down, hobbled by the economic fallout of the war in the Middle East, rising energy and food prices and mounting trade frictions, it is obvious to track how India’s growth is driving from the global backdrop and the ‘fragility of its foundations.”
While giving due credit to India’s pace of relatively steady economic growth with its size, geographic position and large working age population increasingly cementing its role in global economic expansion, when momentum melting down elsewhere, the report qualifies its praise stating that India’s “pursuit of strategic autonomy places a premium on national interests, often running against global consensus”. This has, at times, put New Delhi at odds with multilateral initiatives, particularly at the WTO recent ministerial where it “stood alone in blocking the Investment Facilitation for Development Agreement.” The move was sponsored by China with the full backing of the developed world and all the emerging economies. Is India “continuing a tradition of blocking multilateral trade liberalisation and raising questions about its long-term credibility and willingness to support shared rules,” the report asked.
Going further, it noted that beneath the headline growth figure which tells part of India’s story, its structural constraints—from infrastructure gaps estimated at US$ 500 billion through 2040 to uneven labour force participation—threaten to circumscribe how far and how evenly economic gains are distributed. It pointed out that inveterate social inequalities further complicate the picture, contributing to underused talent and broader inefficiencies that could stymie long-term growth.
It is against this incontrovertible reality that India today sits at the intersection of competing demands. Even as its development path continues to be shaped by longstanding domestic challenges and a more guarded approach to global integration, its policy approach remains “cautious and selectively open, prioritising resilience and strategic autonomy.” The point to ponder is how India navigates these chokepoints would resolve whether its GDP growth projections prove enduring or a flash in the pan to falsify the promises about its Viksit Bharat dream! Going forward, the bend beckons to be either resolute to go the right path or face the fallout by policy fallacy!
(G Srinivasan is a senior economic journalist based in New Delhi)
