India redraws economic strategy as Middle East war sparks oil shock and inflation fears – Firstpost

India is reshaping its economic strategy as the ongoing Middle East conflict emerges as the country’s biggest external challenge since Russia’s invasion of Ukraine in 2022, forcing policymakers to look beyond short-term crisis management towards long-term resilience.

According to an S&P Global report, the disruption in energy supplies, rising crude oil prices and currency volatility have pushed India to rethink its approach across fiscal policy, industrial development and strategic supply chains.

The report says India’s risk management approach is moving from providing immediate buffers to building deeper economic safeguards through self-sufficiency, diversification and stronger domestic manufacturing ecosystems.

The pressure comes at a time when global uncertainty is weighing on growth momentum. The HSBC India Composite PMI slipped to 57.0 in March 2026 from 58.9 in February, marking its weakest reading since November 2022. While business activity continued expanding, companies faced rising costs, slower order growth and volatile market conditions.

To cushion the economy, the government has introduced measures including fuel and fertiliser support, strategic energy management and an Economic Stabilization Fund aimed at protecting India from future external shocks.

The Reserve Bank of India has also stepped into currency markets to limit sharp rupee movements. S&P Global Market Intelligence estimates inflation could rise to 5.6 per cent in 2026 if crude prices remain elevated above $100 per barrel.

However, these measures could complicate India’s fiscal consolidation path. After bringing down the fiscal deficit from pandemic-era highs, higher subsidy spending and economic support measures may increase pressure on government finances.

Beyond immediate challenges, the crisis is accelerating India’s push towards strategic self-reliance. The government is focusing on reducing supply vulnerabilities while attracting investments in critical sectors such as renewable energy, semiconductors and defence manufacturing.

India is also expected to diversify energy partnerships beyond traditional suppliers by strengthening ties with countries including the US, Australia, Mozambique and Nigeria.

The report highlights that India’s long-standing policy of strategic autonomy could become a major advantage in a fragmented global economy.

As geopolitical tensions reshape trade, energy and technology flows, India’s next growth phase may depend not only on economic strength but also on its ability to navigate global uncertainty.