There are certain moments in history when multiple crises intertwine simultaneously, and their combined impact is far more devastating than each crisis in isolation. India today stands at precisely such a difficult crossroads. The war smouldering in West Asia, a weakening monsoon due to El Niño, declining industrial productivity, and a slowdown in international investment all these challenges have collectively pushed India’s economy into a complex bind. To truly understand the depth of this crisis, one cannot merely look at numbers; one must also examine the structural realities and geopolitical entanglements that lie beneath.

The strikes carried out by the United States and Israel against Iran in the latter half of February 2026 sent shockwaves through global energy markets whose reverberations extended well beyond a simple rise in oil prices. Shipping through the Strait of Hormuz virtually ground to a halt, disrupting nearly twenty percent of the world’s total oil supply. This was particularly dangerous for India, which imports approximately 85 percent of its crude oil requirements, a substantial portion of which travels through this very route. Shipping costs rose, insurance premiums spiked, and the rupee came under severe pressure. At one point, the Indian rupee fell to a historic low of 93–94 against the dollar, while major stock market indices collapsed by roughly ten percent within a single month. These developments were directly reflected in industrial production data. In March 2026, India’s Index of Eight Core Industries recorded a contraction of 0.4 percent, the worst performance in 19 months. For the full financial year 2025–26, the combined growth of these sectors stood at a mere 2.6 percent, the weakest performance in five years since the COVID-19 pandemic. These eight sectors carry a weight of nearly 40 percent in India’s Index of Industrial Production, meaning their decline is far from sector-specific.

The most alarming figure within this decline was the record fall in fertiliser production, a staggering 24.6 percent drop in March, the steepest single-month contraction since the current data series began in April 2012. Crude oil production fell by 5.7 percent, marking the seventh consecutive month of year-on-year contraction. Coal output declined by four percent, and electricity generation contracted by 0.5 percent. According to ICRA’s Chief Economist Aditi Nair, growth in steel and cement production, both closely tied to the construction sector, also weakened in March compared to February, signaling a slowdown in construction activity. India’s connection to the conflict extends well beyond energy. Chief Economic Adviser V. Anantha Nageswaran outlined four primary channels through which India is being affected: disruption in the supply of oil, gas, and fertilisers; rising import prices; higher freight costs; and a decline in remittances from Indians working in Gulf countries. This last factor often goes unnoticed, yet it is of critical importance. Gulf countries contribute approximately 38 percent of India’s total foreign exchange earnings. When economies in those nations are destabilized and Indian workers are forced to return home, it not only reduces foreign currency inflows but also compounds the domestic unemployment challenge.

Moody’s analysis has identified India as one of the most vulnerable economies in the Asia-Pacific region. If the conflict is prolonged, India’s income could fall nearly four percent below original projections. EY has been even more explicit, stating that if disruptions continue into financial year 2027, India’s real GDP growth rate could decline by approximately one percentage point, while inflation could remain one and a half percentage points above initial estimates. This dual crisis of sluggish growth combined with rising inflation has placed the Reserve Bank of India in an extraordinarily difficult position: raise interest rates and risk further weakening growth, or lower them and risk stoking inflation further.

But even as India grapples with the war’s fallout, nature demands equal attention. In April 2026, the India Meteorological Department released its first long-range forecast, projecting monsoon rainfall at 92 percent of the long-period average, the first below normal forecast in three years. The primary culprit is El Niño. The IMD has indicated that El Niño-like conditions are expected to develop in the central equatorial Pacific Ocean from June onward, a phenomenon historically associated with reduced rainfall over the Indian subcontinent. According to the IMD, there is a 31 percent probability of below normal rainfall this monsoon season, and a direct 35 percent probability of deficient rainfall, that is, below 90 percent of the long-period average, which is more than double the historical average probability of 16 percent. Private weather agency Skymet offered a slightly more optimistic forecast of 94 percent, but even they placed a 60 percent probability of below normal rainfall specifically for the month of August. August and September are the most critical months for kharif crops, making rainfall during this period of exceptional importance. The IMD believes that a positive phase of the Indian Ocean Dipole could partially offset the monsoon’s weakness, and meteorologist K. J. Ramesh has also noted that global warming is increasing moisture content within the monsoon system. However, these remain uncertain factors, and basing policy on uncertainties is inherently dangerous.

To appreciate the economic significance of monsoon uncertainty, one crucial fact must be kept in mind. Although India’s proportion of irrigated farmland has improved from 49.3 percent to 55 percent in recent years, 45 percent of agriculture still depends entirely on the monsoon. Pulses and oilseeds, which are predominantly grown in non-irrigated areas, are particularly vulnerable. If their production declines, imports will rise, food inflation will surge, and overall economic growth will be hampered. The convergence of these two crises, fertilisers made expensive by war and reduced output due to a weakened monsoon, delivers a double blow to farmers. On one side, input costs rise; on the other, yields fall. Nearly 60 percent of India’s farmers are entirely dependent on the monsoon for the kharif season. When they are in distress, their purchasing power diminishes, directly impacting rural demand. Since rural consumption forms a substantial share of India’s total domestic consumption, this effect ripples through like a chain reaction, eventually reaching urban industries.

In this context, the government has several options available, but each carries its own constraints. Increasing fertiliser subsidies widens the fiscal deficit. Reducing excise duty on petrol cuts into revenue. Reports indicate that the government has decided to reduce excise duty on petrol by ten rupees per litre, a burden that will fall squarely on the exchequer. Yet these measures are temporary, and structural reforms are what India truly needs for lasting solutions. There are, however, some reassuring factors. India produced a record 357 million tonnes of food grains in 2024–25, and the Food Corporation of India’s central buffer stocks held over 60 million tonnes of wheat and rice at the beginning of April 2026, a robust shield from the standpoint of food security. Moreover, in financial year 2025–26, steel production grew by 9.1 percent and cement production by 8.6 percent, indicating relatively strong performance in the infrastructure sector. Yet even as these positives stand to the nation’s credit, the liabilities remain large.

The true significance of March’s data is this: India is moving toward a moment of high risk. The kharif sowing season lies ahead, global supply chains remain stretched, and there are no signs of an early resolution to the West Asian conflict. If fertiliser prices and energy costs remain elevated through April and May, the combined pressure of agricultural input costs and food inflation will hurt ordinary citizens far more acutely. The Chief Economic Adviser has explicitly stated that India’s projected growth rate of 7 to 7.4 percent for 2026–27 carries significant downside risks. The head of the International Monetary Fund has also noted that the effects of the war are already being felt, and that even if the conflict ends quickly, its economic consequences will not easily dissipate. Chatham House has estimated that if the conflict persists for several months, oil prices could rise to 130 dollars per barrel, a scenario that would make India’s situation far more dire.

In confronting this multi-layered crisis, the Indian government cannot afford merely reactive policymaking; proactive planning is essential. Fertiliser stockpiling, water resource management, accelerating rural employment schemes, equitable food distribution, and the Reserve Bank’s deft monetary stewardship to maintain rupee stability, all of these must be managed simultaneously. This is a moment of reckoning. Two years of favourable conditions, cheap fuel and good monsoons, had lent the country a certain aura. Now, as those tailwinds fade, India’s policymakers must truly demonstrate their mettle. A nation’s shining image is not sustained by favorable circumstances alone; it is proven through resolute leadership and decisive action in times of crisis. The question is not whether the crisis will come. The question is how prepared and how effectively we will face it.

Vikas Parashram Meshramis an independent writer, social worker, and researcher associated with rural development. He regularly writes on issues related to tribal communities, rural livelihoods, agriculture, climate change, and social transformation. He is a regular contributor to Asia-Pacific Research.

Source: Global Research