Amid ongoing conflict between US-Israel and Iran, the Organisation for Economic Cooperation and Development (OECD) in its interim Economic Outlook report has projected that India's Gross Domestic Product (GDP) to grow at 7.6 per cent in the current fiscal year 2025-26 (FY26). It said the decline in (US) tariffs should support growth in India, though gas rationing will disrupt some production activities and fiscal support is expected to fade, with growth easing from 7.6 per cent in FY26 to 6.1 per cent in FY27 and 6.4 per cent in FY28.

It noted that the evolving conflict in the Middle East has ‘human and economic costs’ for the countries directly involved, and will test the resilience of the global economy. It said a halt in shipments through the Strait of Hormuz and the closure or damage of energy infrastructure has generated a surge in energy prices and disrupted the global supply of energy and other important commodities, such as fertilisers.

It said the fading deflationary impact of past food and energy price-reducing shocks will be exacerbated by the recent surge in global energy prices, which will push inflation up from 2 per cent in FY 2025-26 to 5.1 per cent and 4.1 per cent in FY 2026-27 and 2027-28, respectively. It highlighted that 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.

As per the report, US bilateral tariff rates have declined following the US Supreme Court ruling against the tariffs imposed under the International Emergency Economic Powers Act. There are particularly large reductions for several emerging-market economies, including India. Nonetheless, the overall US effective tariff rate remains well above that prevailing prior to 2025. The report projected global GDP growth to ease to 2.9 per cent in 2026 before edging up to 3 per cent in 2027.