Indian Economy to Take Time to Recover

April 27, 2026

Abhishek Vij

All major countries in the world that are not directly or indirectly involved in the unfortunate war between the United States, Israel, and Iran want this war to end. The war will end at some point. It should not be assumed that countries not involved in the war will not be affected.

The disruption in global supply is impacting the entire world. India imports approximately 85 percent of its energy, including oil and gas. This agriculturally productive country requires significant fertilizers to maintain agricultural production. Maximo Torero, Chief Economist of the Food and Agriculture Organization, has estimated the negative impact on the Indian economy, foreign investment, and agriculture even after the war.

Food and agricultural scientist Torero says that if a below-normal monsoon and the US-Iran conflict continue simultaneously, corn and wheat production will be affected. Agriculture will suffer from low productivity and poor quality. Adequate energy resources will not be available for irrigation, nor will farmers be able to access adequate urea. Even though the Indian government has decided to purchase a record 2.5 million tons of urea and has announced a fertilizer subsidy of $18.6 billion for farmers for 2026-27, Torero says, Indian agriculture will still be unable to absorb the impact of this shortage. India will remain vulnerable due to this blockade, even after the blockade is lifted. Even after the war ends, it will take time for India to recover.

India currently imports 35 percent of its agricultural fertilizers from Gulf countries and uses more than 120 kilograms of nitrogen per hectare. The country’s domestic fertilizer plants have limited capacity. Declining gas allocations and rising energy prices will increase the natural cost of agricultural production. Nitrogen is the main raw material for fertilizer production. Fertilizer prices are steadily rising. If farmers, faced with increased costs, reduce fertilizer use, it will negatively impact the production of staple crops like rice, maize, and wheat, which are heavily dependent on nitrogen.

If the Strait of Hormuz reopens even within a week, Indian markets will recover and agriculture will not suffer much damage. However, if the fighting continues for a long time, the resulting dire situation could be visible by 2030. Global inflation will rise. FICCI has estimated India’s economic growth rate to fall below 7 percent. The global economy is also expected to decline by 1.7 percent. Remember, even the plants supporting urban industries are operating at less than 70 percent of their capacity.

Due to the lack of sufficient raw materials, production will decline, and normal life will be disrupted. Meanwhile, the Indian Meteorological Department has predicted that monsoon rainfall will be below normal. If rainfall is less and the River Hormuz remains blocked, global production will decline by an average of 5 percent. The costs of irrigation, transportation, storage, and processing in our country’s agriculture will increase. Therefore, it is very unfortunate that even if the war ends, the hardships it has wrought will not leave India. It will take at least a year for India to regain its footing.