India’s growth rate is projected to decline in the near future as it continues to be the fastest-growing major nation in the world, but now with increasing geopolitical pressures. Moody’s Analytics‘ latest projection on the global economy’s outlook for 2026 and 2027 suggests that India will remain the main engine of growth among the big economies, but the growth rate will inevitably slow down.
The financial agency’s recent report, Global Outlook: Running Hot, Running Cold, predicts global economic growth of only 2.5% in 2026 and 2.8% in 2027. This is less than the growth rate expected for the global economy of 3%, as reported by the Business Standard.
Moody’s Ratings cut its growth prediction for India this year from 6.8% to 6% in a parallel move earlier this year. International turbulence, from Middle East violence to trade tensions between the United States and its allies, are cited as key reasons for the price increases and cost of doing business around the world.
The underlying economic damage has already been done, writes Moody’s, even if commodity flows are to return to the norm.
Impact of Global Conflicts on Asian Economies
The Middle East crisis has a real impact on the stability of regional and global markets. If the commodity flow through the Strait of Hormuz continues to be disrupted or if there is further volatility, experts warn, oil prices will shoot up, and in an extreme scenario, the war could become global.
This would greatly increase the inflation rate and slow economic growth, posing a difficult choice for central banks. That would leave policymakers with a choice between reducing rates to stimulate the real economy and risking further inflation, or increasing rates that would also do some damage to the real economy but which could help to lower inflation.
The International Energy Agency (IEA) has specifically highlighted these dangers to developing countries. In an interview with Bloomberg Television recently, IEA Executive Director Fatih Birol stated that a prolonged closure of the Strait of Hormuz would bring about far-reaching economic problems across the world.
Developed economies such as Japan and South Korea have already felt the effects of disruptions to oil supplies from the Middle Eastern and Central Asian region, but Birol noted that developing South Asian economies, and in particular India, Pakistan and Bangladesh, are far more vulnerable to such spikes in energy consumption.
