Early signs of deceleration evident in select economic indicators due to West Asia war, says RBI bulletin

Select high-frequency economic indicators released in April 2026 showed early but measurable signs of deceleration in India's economic activity, with analyst...

What Happened

Select high-frequency economic indicators released in April 2026 showed early but measurable signs of deceleration in India's economic activity, with analysts and official bodies attributing the softening to the direct and indirect impact of the West Asia conflict.
India's manufacturing Purchasing Managers' Index (PMI) fell to 53.9 in March 2026 from 56.9 in February, its lowest reading since June 2022, as elevated input costs and supply uncertainty compressed output and new order growth to their slowest pace in nearly four years.
The Index of Eight Core Industries contracted by 0.4% in March 2026 — its worst performance in 19 months — driven by sharp declines in fertiliser production (-24.6%), crude oil output, coal, and electricity, with the fertiliser sector's decline directly traced to disrupted raw material imports from West Asia.
Merchandise exports contracted by 0.8% in February 2026, led by a fall in petroleum product exports, while merchandise imports surged 24.1% in the same period, driven by higher crude oil, electronic goods, and coal imports — widening the trade deficit.
India's economic growth projection for FY27 was revised down to 6.6% by the World Bank (April 2026), and the Chief Economic Advisor flagged "considerable downside risk" to the government's projected 7–7.4% growth if the conflict persists.

Static Topic Bridges

Index of Eight Core Industries (ICI)

The Index of Eight Core Industries is a monthly index that measures the output performance of eight key infrastructure industries: coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, and electricity. Together, these sectors have a weight of 40.27% in the Index of Industrial Production (IIP), making the core sector index a leading indicator of overall industrial activity.

The eight core industries and their IIP weights: petroleum refinery products (28.04%), electricity (19.85%), steel (17.92%), coal (10.33%), crude oil (8.98%), natural gas (6.88%), cement (5.37%), fertilisers (2.63%).
A decline in the core sector index typically foreshadows a broader IIP contraction in subsequent months.
The March 2026 core sector contraction of 0.4% was the worst in 19 months and the sharpest since August 2024.
Fertiliser output fell 24.6% — the steepest sectoral decline — due to import disruptions of phosphatic and potassic raw materials from West Asia.

Connection to this news: The March 2026 core sector contraction is among the most direct statistical signals of how the West Asia conflict has hit Indian industrial output — particularly through the fertiliser supply chain, which is disproportionately dependent on West Asian inputs.

Purchasing Managers' Index (PMI): A Business Cycle Indicator

The Purchasing Managers' Index (PMI) is a monthly survey-based indicator published by S&P Global, compiled from surveys of purchasing managers across manufacturing and services firms. A reading above 50 indicates expansion; below 50 indicates contraction. The PMI is one of the most closely watched high-frequency indicators by the RBI, government, and investors because it provides a real-time snapshot of business conditions.

India's manufacturing PMI in March 2026: 53.9 (down from 56.9 in February); lowest since June 2022.
The decline reflected slower new order growth, input cost pressures (primarily from higher energy and raw material prices), and cautious business sentiment due to geopolitical uncertainty.
Services PMI also softened, reaching a 14-month low, as services exports and domestic demand growth moderated.
A PMI consistently above 50 is necessary to sustain employment and investment growth; the decline toward 53 from 56+ levels signals a meaningful loss of economic momentum.

Connection to this news: The PMI data is one of the earliest available statistical confirmations of the economic deceleration attributed to the West Asia conflict — the survey captures business expectations and real-time procurement decisions, making it a leading indicator of GDP growth trends.

India's Current Account and Trade Balance: Structural Vulnerabilities

India's current account is structurally in deficit, primarily because of its large hydrocarbon import bill. When energy prices rise sharply due to geopolitical disruptions, the trade deficit widens, putting pressure on the rupee, reducing foreign exchange reserves, and tightening financial conditions for import-dependent industries.

India's merchandise trade deficit typically ranges between $20–25 billion per month; energy (petroleum, coal, LNG) accounts for approximately 35–40% of total imports.
Merchandise exports contracted 0.8% in February 2026; imports surged 24.1% — primarily due to higher crude oil, electronic goods, and coal import bills.
India's exports to the West Asian region fell approximately 57.95% to $3.5 billion; imports from the region fell approximately 51.64% to $8.7 billion during the conflict period.
West Asia is a significant market for Indian engineering goods, gems and jewellery, and pharmaceuticals; the conflict has suppressed demand from these buyers.

Connection to this news: The February 2026 trade data provides the balance-of-payments dimension of the deceleration story — the conflict is simultaneously raising India's import costs and compressing its export revenues, creating a twin drag on growth.

Fertiliser Sector and Agricultural Supply Chain Risks

India's fertiliser industry relies heavily on imports for key inputs. Phosphatic fertilisers (DAP, MAP) use phosphoric acid, a significant share of which is sourced from West Asia and North Africa. Potassic fertilisers (MOP) are imported from Canada, Russia, and the Middle East. Disruptions in these supply chains translate directly into higher input costs for Indian farmers, a risk to crop yields, and potential food price inflation — a dimension of the West Asia conflict with distinct rural economy and food security implications.

Fertiliser production fell 24.6% in March 2026 — the most severely affected of the eight core industries.
India imports approximately 80% of its phosphatic fertiliser inputs and nearly 100% of its potassic fertiliser requirements.
Higher fertiliser costs are partially offset by government subsidies through the Nutrient-Based Subsidy (NBS) scheme for P&K fertilisers; escalating costs could significantly widen the fertiliser subsidy bill.
Kharif sowing season (June–September) typically begins in June; any prolonged fertiliser supply disruption heading into May–June would carry direct implications for agricultural output.

Connection to this news: The 24.6% fertiliser output decline is not merely an industrial statistic — it is a warning signal about the conflict's potential to ripple from global energy markets into India's agricultural economy and food security, particularly if the disruption persists into the Kharif sowing window.

Key Facts & Data

India's manufacturing PMI: 53.9 in March 2026 (down from 56.9 in February); 4-year low
Index of Eight Core Industries: -0.4% in March 2026 (19-month low)
Fertiliser production: -24.6% in March 2026 (sharpest sectoral decline)
Merchandise exports: -0.8% in February 2026; merchandise imports: +24.1%
India's exports to West Asia fell approximately 57.95% to $3.5 billion during the conflict period
World Bank FY27 GDP projection for India: 6.6% (April 2026)
RBI FY27 GDP projection: 6.9%; risks tilted to the downside
Severe oil price scenario ($130/barrel for 2–3 quarters): GDP growth could fall to 6.4%, CPI could reach 5.5%
India imports approximately 80% of phosphatic fertiliser inputs and 100% of potassic fertiliser requirements
Eight core industries have a combined IIP weight of 40.27%