Amid Rising Global Risks, India Needs A Predictable Business Environment

According to the World Bank, India, which managed the trade turbulence well during the last fiscal, entered the current crisis in the region from a position of strength.

But concerns remain.

A prolonged conflict in the region may damage critical energy infrastructure, leading to higher oil and natural gas prices, the report said. Though India would be able to absorb temporary shocks, “its reliance on energy imports from the region leaves the external balance, inflation, and fiscal position vulnerable to an extended Middle East conflict.”

The conflict underscores the urgency of diversifying energy supplies, accelerating the transition to renewables, and maintaining a credible fiscal consolidation path, the report noted.

Importantly, the crisis leading to disruptions in supply and prices of oil, natural gas, and fertilizers would impact India’s macroeconomic and fiscal calculations.

Private Consumption May Slowdown

What about private consumption? India's private consumption has been steadily increasing over the last few years.The crisis could dent that growth. This is worrisome as the Centre has been betting on consumption-led growth. The report said that household disposable income is likely to reduce due to higher global oil prices affecting inflation. 

At any given time when a crisis situation of this level erupts, the first thing that hits is the sentiment and this leads to consumers playing safe and deferring purchases. 

Though a growing middle class and domestic consumption have cushioned India’s economy despite the severe trade challenges in 2025, going ahead, employment generation will be key. The Iran war impacting the whole of West Asis may even force a large number of Indians to return home. Not just that, the Centre is also keen to woo them back amid concerns over talent shortage within the country. 

Boosting private sector-led growth will be critical to strengthening economic resilience and supporting more young people to enter the workforce

– Paul Procee, World Bank Acting Director for India

Ensuring a predictable business environment will therefore be  key for India as it sets its eyes on achieving the Viksit Bharat status by 2047.

India Needs Predictable Policy, Business Environment

Amid the rising geopolitical risks, India needs to push reforms and allow businesses to grow while focusing on job generation. The most vulnerable will be the micro, small, and medium enterprises (MSMEs). According to an official statement, there are about 6.5 crore MSMEs providing employment to about 28 crore people.

“Growth built on compressed public investment, with a fiscal buffer eroding under geopolitical pressure, job creation that hasn’t kept pace — that is a number worth interrogating, not just celebrating,” Mitali Nikore, Founder and Chief Economist, Nikore Associates, told The Secretariat.

Artificial Intelligence (AI) has begun to somewhat disrupt the jobs market. “Higher AI exposure is associated with slower hiring, especially among multinational affiliates,” Nikore said, adding that the South Asian firms supplying goods and services to more AI-exposed foreign companies have also experienced slower hiring. “The disruption can be felt,” she said.

A large number of MSMEs have started to feel the heat due to the global energy shocks. “Not only has the logistics cost increased, but the price of raw material, including natural gas and liquified petroleum gas (LPG), and its availability has become a cause for concern. Production has slowed down, and if things don’t get resolved soon, it could be a big blow,” an MSME promoter said.

Meanwhile, the Asian Development Bank has also revised India's growth forecast to 6.9% in 2026, accelerating to 7.3% in 2027, supported by resilient domestic consumption, outpacing the entire Asia-Pacific. The Reserve Bank of India too projected a growth rate of 6.9% for the current financial year.  

Government officials said that the situation in West Asia is being closely monitored by all ministries along with the Prime Minister's Office and Niti Aayog. "We are ready to take all necessary steps to support the economy," one of them said.