India: Growth risks from Iran shock – Societe Generale

Societe Generale’s Kunal Kundu assesses how the Iran crisis could affect India, stressing that growth risks outweigh inflation pressures. The report highlights India’s reliance on energy, trade and remittances, and notes rising logistics costs, fertiliser price risks and twin-deficit concerns. It also outlines modest forecast downgrades and expects the RBI to keep policy on hold while managing liquidity.

Iran shock seen hitting India growth

"Worries about potential scarring of the Indian economy from the Iran crisis are escalating as disruptions persist."

"In the near term, we are more concerned about the growth hit than the inflation impulse."

"Given India’s heavy dependence on energy, trade, and remittance flows, instability in West Asia has been transmitting shocks—most visibly through asset prices and early signs of economic stress."

"The Iran war is more likely to hit India’s growth via supply disruptions (oil/LNG, shipping) than to trigger a sustained inflation overshoot—keeping the RBI biased to hold rather than tighten unless the shock worsens."

"LNG disruptions from Qatar and higher global urea/ammonia prices have already led some producers to trim urea output; trade bodies warn $1,000/tonne urea is possible if Gulf flows stay constrained, pushing the fertiliser subsidy above budgeted levels."

"Higher oil would pressure the currency and widen both the fiscal deficit and CAD if tensions persist."

"Assuming crude has peaked and eases slowly (averaging $75–80/bbl in 2026), we expect growth ~0.3 pp lower and inflation ~0.2 pp higher."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)