Iran war could drag India’s GDP growth to 6.5% this fiscal, says CII president Rajiv Memani

New Delhi: The Indian economy could expand about 7% this fiscal year if the Iran war ends soon but growth could slip to 6.5% if the conflict continues, prolonging disruptions in global supply chains, Rajiv Memani, president, Confederation of Indian Industry (CII) said Tuesday. Economic growth is estimated at 7.6% in FY26.Hit by frequent external headwinds such as the pandemic, Ukraine war, additional US tariffs, and the Iran war, in rapid intervals, many companies are now looking to create buffers to better shield their balance sheets against future shocks, Memani told ET in an interview.

Also Read: Prolonged West Asia crisis may pull down India’s GDP growth to less than 6.5 pc: CII President

He expressed optimism that private investments could see a broader rebound once the conflict in West Asia abates. Such investments had gained traction prior to the double whammy of high US tariffs and the Iran war hitting India Inc. Capital spending by listed non-financial companies had grown 25% in FY25 to ₹11 lakh crore.

“So once the tariff issue (with the US) settles and which is settling down now, and the war-driven energy crisis abates, a strong momentum in GDP growth and investments will definitely take place,” Memani said. He called for a proactive approach in drawing foreign direct investments.

Chief economic adviser V Anantha Nageswaran had on Saturday called on India Inc to step up investments and help lift growth amid the external turmoil.

To improve manufacturing, Memani rooted for the launch of more production-linked incentive schemes in areas where import dependence remains large, while allowing the continuance of key existing ones, especially in electronics.The CII, he said, has drawn up a list of 80-100 products where manufacturing can be pushed to reduce import reliance. The sharp rupee depreciation against the dollar in recent months-adding to India’s free trade agreements with key economies such as the UK and the EU-would prop up exports in the medium term, helping the current account, he said.

Consumption remains strong

Memani said consumption demand isn’t showing any visible sign of faltering yet, although input prices for companies are rising. While some pass-through of the elevated costs happened in the business-to-business segments, the business-to-consumer category has largely remained protected.

Also Read: Indian investments in US on rise, creating American jobs: Official

Consumption remains critical to sustaining growth momentum as external woes have hurt investor sentiments and capital inflows. The country’s strong macroeconomic fundamentals have cushioned the Iran war impact, he said, adding that the Centre has remained nimble-footed in addressing the current crisis.

AI picking up

Memani said the adoption of AI by enterprises in India is gaining traction. “If companies don’t adopt AI, it will be hard for them to be globally competitive,” he said.