The economy has recently been yielding some discomfiting data, even before the war in West Asia began. The most recent of these was the February 2026 data on the Index of Eight Core Industries. This release showed that growth in the overall Index had dropped to a three-month low in February, half the rate of what it saw in January. This was not a case of a high base effect, either, with growth in February 2025 having been just 3.4%. The sector-wise data reveal further issues. The domestic crude oil industry has been contracting for six consecutive months. In fact, the sector has contracted in 20 out of the last 24 months. The natural gas sector, too, has contracted for the last 20 consecutive months. As context, from about the middle of last year, it had been increasingly clear that there would be some sort of escalation between the U.S. and Iran, even if the exact nature of the war now could not have been predicted then. It is no secret that India is highly dependent on energy imports, especially from the region that would have faced the brunt of any such escalation. As a matter of fact, a large part of the contraction in domestic production was likely because imports were coming cheap. Yet, as tensions increased, it might have been more prudent to have increased domestic oil and gas production over the last eight months so as to at least build reserves, if not to also temporarily reduce import dependence. Permanently reducing such dependence will take time, but a temporary domestic production push — as is belatedly underway — might have considerably alleviated the current supply crunch. Hindsight is 20-20, but that does not excuse a lack of foresight or an inability to learn. The Pradhan Mantri Ujjwala Yojana of 2016 should have triggered a concerted policy to secure LPG supplies and reserves.
This poor core sector performance comes on top of the new series of GDP data showing that the Indian economy is actually smaller than previously thought. Further, between 2022-23 and 2025-26, the contributions to GDP of key engines such as private consumption, capital formation, exports and imports have all fallen. The share of ‘change in stocks’ has nearly doubled, however, meaning that there is production but not enough sales. Soon, that production too will reduce to fall in line with the subdued demand. All of this leads into the impact of the current crisis. With commercial fuel sources curtailed, oil prices at more than $100 a barrel, and global economic uncertainty at a high, economists and rating agencies are already downgrading India’s growth outlook to about 6.5%. Perhaps, India’s much-vaunted macroeconomic fundamentals and resilience need a more realistic assessment.
Published – March 24, 2026 12:10 am IST
