India is weathering the latest oil shock and West Asia conflict from a “situation of strength,” with GDP projected at 6.8 per cent-7.1 per cent in FY27 despite global headwinds, SBI Research said in its latest report. Historically, every major oil shock pushed the US economy into recession.
This time looks different, the report argued. “Unlike during earlier oil shocks, US households are receiving substantial tax refunds, and the US is energy self-sufficient, in contrast to earlier episodes. Thus, as an oil exporter, the US now keeps higher energy spending at home when prices rise.”
For India, the macro backdrop remains firm. “The country has entered the global geo-political conflict from a situation of strength this time with FY26 growth at 7.6 per cent, similar to Russia and Ukraine crisis, when India was expanding at more than 9 per cent,” the report said.
FY27 growth is pegged at 6.8 per cent, though “fears of Super El Nino could cloud growth estimates,” with inflation seen averaging 4.5 per cent and the fiscal deficit at 4.5-4.6 per cent. “India has a strong Banking sector,” SBI Research noted, adding there is a need for “a comprehensive package to support Balance of Payments and hence Rupee.”
The conflict has created “multiple vortexes of headwinds” across second- and third-tier impacts, agriculture, MSMEs, consumption, and global supply chains, yet the report sees “green shoots” India can use to reposition in global value chains. “Dubai and Abu Dhabi financial centres are entering a period of uncertainty,” with rising West Asia tensions prompting some global investors and NRIs to reassess concentrated exposure to Dubai.
“This presents a good opportunity for IFSC GIFT City as a stable global financial destination,” the report said.With airspace over parts of the Middle East and the UAE turning risky as the Iran conflict disrupts traditional routes, airports in India and China could gain as alternative transit hubs.
Capturing that, however, “may require investments in airport infrastructure, connectivity and passenger experience.” On monetary policy, SBI Research said many developed and emerging market central banks have paused in 2026 after rate cuts in 2025. Central banks are now “reassessing the glide path afresh if a promising deal… is brokered for peace in the raging West Asia, duly incorporating the impact of domestic macros, trade headwinds, fiscal constraints and currency perils.”
For the RBI, the “growth-inflation paradox” leaves “little room for a rate decision at this juncture.” Status quo is likely “till the full impact of the war, as also evolving climate patterns become clear, implying a lower for longer regime to continue.”
The report noted that India continues to demonstrate resilience, with GDP likely to grow in the range of around 6.8 per cent-7.1 per cent, despite global uncertainties and regional conflict.
Published on April 19, 2026
