Escalating geopolitical tensions and supply disruptions stemming from the US-Iran war are casting a long shadow over the global and domestic economic outlook, even as a temporary ceasefire offers short-term relief, the Reserve Bank of India (RBI) said in its April 2026 bulletin.
“The global macroeconomic milieu has undergone a significant shift with supply chain disruptions and rising energy costs due to the West Asia conflict,” the central bank said in the bulletin’s State of the Economy article.
It cautioned that heightened in commodity prices and financial markets has added to the uncertainty, underlining the fragile nature of the recovery. RBI flagged that the trajectory of the war will be critical.
“Further intensification of the conflict, its prolongation and widening geographical spread remain the key downside risks to the global outlook,” it said, adding that damage to energy and related infrastructure could significantly alter both inflation and growth dynamics.
The risks are not merely external. The central bank warned that prolonged disruptions could spill over into India through multiple channels. “If the conflict persists and supply chains are not restored early, it may create challenges to the domestic economy in the form of higher energy costs, input cost pressures, disruption in trade flows and financial market spillovers,” the article said.
This assessment aligns with broader macroeconomic signals highlighted in the bulletin. momentum remains supported by robust consumption and investment, with gross domestic product (GDP) estimated at 7.6% for 2025-26 (April-March), but the outlook for 2026-27 faces headwinds from elevated energy prices and supply bottlenecks.
While headline numbers have remained within the central bank’s tolerance band, risks are building, it said.
“Though inflation remains contained within the tolerance band, upside risks have increased, driven by supply-side disruptions, including weather-related uncertainties.”
It also warned of possible second-round effects, with the supply shock transforming into a demand shock, signalling concerns over persistent inflationary pressures.
The article also highlighted the role of recent geopolitical developments in easing near-term pressures. “The temporary two-week ceasefire between the US and Iran has, however, provided some breather to the global economy,” it said.
Despite these risks, RBI struck a note of cautious optimism on India’s resilience. Strong macroeconomic fundamentals, including stable growth, contained inflation and improving financial sector health, are expected to act as buffers.
“The strong macroeconomic fundamentals should support the Indian economy to maintain its resilience to withstand such shocks,” the central bank said.