For FY28, the outlook remains unchanged at 6.4%. India’s gross domestic product (GDP) is expected to grow 7.6% in FY26, according to official estimates.
The ongoing Gulf conflict has disrupted supply chains and production, driving up raw material costs. India imports more than 85% of its crude oil requirements, with about half passing through the Strait of Hormuz, exposing it to oil shocks.
India will, however, remain the fastest-growing economy, ahead of China (4.4% in 2026), United States (2%), Japan (0.9%) and United Kingdom (0.7%).
Global growth outlook remained unchanged for 2026 at 2.9%, but estimates for 2027 were revised downwards to 3% from 3.1% earlier, according to the OECD Economic Outlook, Interim Report March 2026.
“The conflict in the Middle East is testing the resilience of the global economy,” said the OECD.
Growth is supported by strong tech investment, lower tariffs, and momentum from 2025, but rising energy prices and supply disruptions are increasing costs, reducing demand, and fueling inflation, it said.Inflation in India is expected to rise sharply to 5.1% in FY27 from 2% in FY26, according to OECD.
The fading deflationary impact of past food and energy price-reducing shocks will be exacerbated by the recent surge in global energy prices, pushing inflation to 5.1% in FY27 and 4.1% in FY28, it said.
Retail inflation rose 3.21% year-on-year in February from 2.74% in January.
The Paris-based institution also expects India to temporarily raise policy rates temporarily in 2026. “Amongst the emerging-market economies, India is projected to raise policy rates temporarily in the second quarter of 2026 to help offset stronger inflationary pressures,” it said.
The monetary policy committee of the Reserve Bank of India is set to meet early next week, after keeping the benchmark repo rate steady at 5.25% in February.