The Iran war is hitting many countries beyond they could have imagined. The IMF forecast has subdued global growth. India is no less a sufferer. IMF makes India slip to sixth largest economy as the rupee sinks, oil prices hit inflation high, and a combination of factors make IPO’s lose steam while the BSE Sensex thaws.
The IMF warned that a prolonged conflict could heighten financial instability, requiring carefully calibrated policy responses. It has downgraded the global growth forecast for 2026 from 3.3 to 3.1%, due to the war. It recalibrated global Indian position from fifth largest economy to sixth with GDP at current prices estimated at $3.76 trillion against the UK’s $3.7 trillion.
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However, the IMF projects India’s FY27 GDP growth at 6.5%, remaining the fastest-growing major economy, but warns that high oil prices pose risks to inflation seen at 4.7%. On the contrary, Goldman Sachs has slashed India’s 2026 GDP growth forecast to 5.9% (from an earlier 7% projection) due to risks from the Iran conflict, high oil prices, and currency depreciation. Goldman Sachs downgraded Indian equities to “market weight” and cut the Nifty 50 12-month target, citing less attractive risk-reward ratios. Increased Brent crude oil prices (expected to average high in March/April 2026) are raising inflationary pressures and widening the current account deficit to 2% of GDP.
The IMF sees the Indian rupee depreciating from Rs 84.57 to a dollar in 2024 to Rs 92.59 this year. It has not taken into calculation the recent fall of the rupee to Rs 95.04, though for a while. Meanwhile, Reuters reports that Indian oil refiners are now paying for Iranian oil in Chinese yuan. Is Yuan emerging as a new currency?
Statistics can be deceptive. The GDP as a measure of progress may also be elusive. Concerns over India’s GDP data stem from a perceived gap between headline growth and ground realities, with critics arguing that expansion may be more “statistical” than real. A 2026 study by Arvind Subramanian, Abhishek Anand, and Josh Felman suggests GDP growth may have been overstated by 1.5 to 2 percentage points annually between 2012 and 2023 due to methodological issues.
Key doubts arise from weak manufacturing performance and limited job creation, which do not match high growth claims. GDP estimates may also understate the impact of shocks like demonetisation, GST, and COVID-19 on the vast unorganised sector. The use of the Wholesale Price Index (WPI) rather than the Producer Price Index (PPI) for inflation adjustment, reliance on the MCA21 corporate database, and divergence from indicators like credit growth, exports, and electricity consumption further reinforce concerns about overestimated growth.
The Ministry of Corporate Affairs’ MCA21 database has been questioned, as it may use limited, unreliable data for smaller firms, painting a rosier picture of company performance.
GDP counts output, not reality. GDP doesn’t count unpaid domestic work. Women in India contribute an estimated 7.5% of GDP in unpaid labour — child care, cooking, cleaning and elderly care. If a family hires a cook, GDP goes up. If the mother does the same work, GDP doesn’t move. The work is identical. The counting isn’t.
GDP doesn’t subtract environmental damage. India lost 1.36 million hectares of tree cover between 2001 and 2023. Every tree cut generated economic activity that showed up in GDP. The long-term cost — flooding, soil erosion, water table collapse, health impact — doesn’t get subtracted. The destruction is counted. The consequence isn’t.
Nor does GDP distinguish debt-driven spending from real prosperity. India’s household debt crossed 42% of GDP. Personal loans under Rs 10,000 have a 44% spike in defaults. When a family borrows to buy a phone or pay a hospital bill, that spending adds to GDP. When they default, the default doesn’t subtract from it.
There are alternatives. The UNDP’s Human Development Index measures life expectancy, education, and income together. Bhutan uses Gross National Happiness. The OECD has a Better Life Index covering housing, jobs, health, environment, safety, and life satisfaction. India publishes none of these as a primary measure. GDP is useful, but on its own it cannot show whether lives are truly improving.
