According to the RBI, cost pressures and uncertainty have taken a toll on new orders and output. (AI image)

When it comes to the Indian economy, domestic resilience is often cited as its biggest strength. But how long can the Indian economy continue to hold well as external pressures in the form of supply disruptions and rising import prices pile pressure? In its latest bulletin the Reserve Bank of India (RBI) has pointed to emerging pressure points, while at the same time exuding confidence in India’s ability to withstand shocks.For RBI the situation is clear: The resilience of the global economy, already inflicted with trade tensions, is being tested by the conflict in West Asia. The near halt in tanker movements through the Strait of Hormuz has intensified pressures in the global supply chains. The durability and intensity of the conflict pose substantial uncertainty to the global growth prospects amidst broader supply chain disruptions and elevated energy prices.The standstill tanker traffic in the Strait of Hormuz caused a significant disruption in the global supply chains in March. The World Bank Commodity Price Index rose sharply, driven by higher energy and fertiliser prices, says RBI.In this scenario, India is not immune to global shockwaves – but it’s managing to hold on for now. “The Indian economy continues to hold its ground despite facing a major supply shock due to the conflict in West Asia,” says RBI.

Rupee, markets & external sectorThe key external sector vulnerability indicators, viz., external debt-to-GDP ratio, net international investment position (IIP) to GDP ratio, and debt service ratio, remained contained at end-December 2025, says RBI. Also, India’s foreign exchange reserves remain comfortable, providing cover for goods imports of around 11 months and around 92 per cent of the external debt outstanding as at end-December 2025.

As the war has led to a decline in many global stock markets, Indian equities have also come under pressure. “Indian equity markets declined in March amidst persistent uncertainty and selling pressures by foreign portfolio investors before recovering moderately in April on the announcement of temporary ceasefire and moderation in crude oil prices. Net FPI outflows surged in March and the net selling continued into April,” notes RBI.The rupee, already dealing with depreciation due to FII outflows, has been dealt with another blow in the form of the war.

“Amidst financial market volatility due to the West Asia conflict, the Indian rupee witnessed depreciation against the US dollar in March. The depreciation pressures were, however, arrested in April following the measures taken by the Reserve Bank and the announcement of a ceasefire between the US and Iran. In real effective terms, the Indian rupee depreciated in March due to depreciation of INR in nominal effective terms and relatively lower inflation in India vis-à-vis its major trading partners,” the central bank says.What indicators suggest about India’s situationWhat does the latest data suggest about how India’s various sectors are bearing the impact of higher crude prices and input costs, raw material supply disruptions?According to the RBI, available high-frequency indicators of economic activity displayed divergent trends in March: the demand conditions remained resilient, despite some pockets of slowdown in economic momentum.

However, RBI’s forward looking surveys point towards softening consumer confidence on the current situation and moderation in business optimism along with buildup of cost pressures. These need to be watched out, and the duration of the Middle East conflict will be an important deciding factor in how deeply the disruptions may impact economic growth.The situation is summed up in a few points:

Slowdown looming? Some pockets show signs of pressureWhile the RBI has pointed out that domestic economic resilience continues to shield the economy from any major shocks, external-linked sectors are showing signs of pressure. Some areas in which the early signs of deceleration are showing are:

However, the RBI also points out that domestic high-frequency indicators for March, in general, do not reflect much adverse impact of the global supply chain bottlenecks.

“Some of the key risks have been contained by the government, ensuring uninterrupted availability of petroleum products across the country. Overall demand conditions remained resilient with greater support from rural areas,” it notes.India’s resilience put to testEven as external pressures continue to mount, the IMF has actually upgraded India’s GDP growth forecast for the current financial year. But inflation projections have also been revised up. The biggest takeaway from the RBI bulletin is that India’s domestic supply chains may come under risk from a prolonged war scenario, though strong macroeconomic fundamentals provide a buffer.“The global macroeconomic milieu has undergone a significant shift with supply chain disruptions and rising energy costs due to the West Asia conflict. Heightened volatility in commodity prices and financial markets has added to the uncertainty,” the RBI says.

“Further intensification of the conflict, its prolongation and widening geographical spread remain the key downside risks to the global outlook. The intensity and the duration of the conflict and the resultant damage to the energy and other infrastructure add risk to the inflation and growth outlook,” the central bank says.These very risks also have implications for the Indian economy. As the central bank explains: If the conflict persists and supply chains are not restored early, it may create challenges to the domestic economy in the form of higher energy costs, input cost pressures, disruption in trade flows and financial market spillovers. It is this very caution that led to the RBI keeping the repo rate unchanged in its April monetary policy.“Though inflation remains contained within the tolerance band, upside risks have increased, driven by supply-side disruptions, including weather-related uncertainties. Possible second round effects with the supply shock transforming itself into demand shock also warrant careful and continuous assessment,” RBI cautions.“The temporary two-week ceasefire between the US and Iran has, however, provided some breather to the global economy. The strong macroeconomic fundamentals should support the Indian economy to maintain its resilience to withstand such shocks,” it concludes.

US markets opened on a mixed note Tuesday, with the Dow Jones holding modest gains while the Nasdaq retreated as pressure on technology shares offset strength in defensive names and select consumer stocks.By 9:59 am ET, the Dow Jones Industrial Average was up 57.59 points, or 0.12 per cent, at 49,225.38. The S&P 500 slipped 33.41 points, or 0.47 per cent, to 7,140.50, while the Nasdaq Composite lost 196.43 points, or 0.79 per cent, Reuters reported.The sharpest drag came from technology counters after a Wall Street Journal report said OpenAI had fallen short of internal targets for weekly users and revenue. The update triggered fresh questions over whether the AI-led market rally can sustain itself amid massive spending on chips, cloud infrastructure and data centres.Because AI-linked companies have driven much of Wall Street’s recent gains, any sign of slowing momentum quickly weighed on sentiment.Oracle dropped 2.9 per cent as investors reassessed growth expectations tied to cloud demand and AI partnerships.Semiconductor shares also came under pressure. Nvidia fell 2.4 per cent, AMD declined 3.5 per cent and Arm Holdings slid 6.3 per cent. CoreWeave, backed by Nvidia, lost 2 per cent.The information technology segment of the S&P 500 fell 1.3 per cent, making it the worst-performing major sector in early trade.Apart from AI concerns, investors remained cautious over the US-Iran war and continued disruption in the Strait of Hormuz, a key artery for global crude shipments.Oil prices remained elevated, with Brent crude moving above $110 a barrel for the first time in three weeks. Prices are now around 53 per cent higher than levels seen before the conflict intensified.A US official said President Donald Trump was dissatisfied with Iran’s latest proposal to resolve the conflict, reducing hopes of a near-term diplomatic breakthrough.Higher oil prices are fuelling worries that inflationary pressures could return and squeeze corporate margins.Adding another layer of uncertainty, the United Arab Emirates announced it would leave OPEC and OPEC+, a move that could alter future supply dynamics in the global crude market.Corporate results also shaped early moves on Wall Street. United Parcel Service fell 5.7 per cent after reporting a steep drop in quarterly adjusted profit.General Motors lost 3 per cent even after raising its full-year earnings outlook, supported by resilient demand in the US auto market and expected tariff refunds.Coca-Cola rose 5.5 per cent after lifting its annual adjusted profit forecast, helped by pricing power and stable demand.Declining shares outpaced gainers by 1.49-to-1 on the NYSE and 1.48-to-1 on the Nasdaq, reflecting broad weakness beneath the headline indices. The S&P 500 registered three fresh 52-week highs and six lows, while the Nasdaq Composite recorded 58 new highs and 47 new lows.

Collectively, OPEC nations account for roughly 36 per cent of global oil output. (AI image)

In a significant move which may have implications for the world oil market, the United Arab Emirates (UAE) has announced that it will pull out of OPEC and OPEC+ alliances. The move comes amid the ongoing Middle East crisis which has sent crude oil prices sky rocketing past the $100 per barrel mark.The Organization of the Petroleum Exporting Countries or OPEC is a group of major oil-producing nations. This group coordinates their petroleum production policies to help effectively manage global oil supply and influence crude prices.OPEC+ is a broader alliance which includes OPEC members and several other major non-OPEC producers of oil such as Russia. This group also works to coordinate output levels of crude with an aim to stabilize the global oil market.

What UAE Has Said

UAE has said that the move is aimed at prioritising its national interests. A leading global oil producer, the UAE has at times expressed reservations about OPEC’s production limits. The statement said the decision aligns with the UAE’s long-term strategic and economic objectives, as well as its evolving energy landscape.“During our time in the organisation, we made significant contributions and even greater sacrifices for the benefit of all. However, the time has come to focus our efforts on what our national interest dictates,” the statement said.Also Read | Strait of Hormuz blockade persists, but India’s imports of Russian oil are down from highs seen in March – here’s whyUAE Energy Minister Suhail Mohamed Al Mazrouei told Reuters that the decision followed a thorough review of the country’s current and long-term energy strategy.When asked whether the UAE had consulted Saudi Arabia before making the move, he said no discussions had taken place with any other country on the matter.“This is a policy decision, it has been done after a careful look at current and future policies related to level of production,” he said.The UAE’s decision follows growing frustration in Abu Dhabi over what it sees as insufficient support from fellow Arab nations during repeated Iranian attacks amid the ongoing conflict.Anwar Gargash, diplomatic adviser to the UAE president, openly criticised the response from both Arab states and Gulf allies during a session at the Gulf Influencers Forum on Monday.He said that while Gulf Cooperation Council member states had provided logistical assistance to one another, their political and military response had been historically weak.Gargash added that he had expected a limited response from the Arab League and was therefore not surprised by its stance. However, he said he had anticipated a stronger and more unified position from the Gulf Cooperation Council, making its muted reaction particularly disappointing.

What Does UAE’s Exit From OPEC & OPEC+ Mean?

According to Reuters, UAE’s move delivers a significant setback to the oil-producing alliances and their leading force, Saudi Arabia. Oil prices which had risen to $110 per barrel earlier today, trimmed gains after UAE’s announcement.The departure of the UAE, one of OPEC’s long-standing members, could disrupt the cohesion of the group and diminish its influence, the Reuters report said. OPEC has traditionally sought to project unity, even when member nations have differed on issues ranging from geopolitical developments to production targets.Meanwhile, Gulf producers within OPEC have already been facing difficulties in exporting crude due to disruptions in the Strait of Hormuz. This narrow waterway, located between Iran and Oman, normally handles around one-fifth of global crude oil and liquefied natural gas shipments. Iranian threats and attacks on vessels in the region have further complicated the movement of energy supplies.Mazrouei said the UAE’s decision to leave OPEC is unlikely to cause a major immediate disruption to oil markets, given the current challenges surrounding the Strait of Hormuz.However, the UAE’s departure marks a significant political victory for US President Donald Trump, who has repeatedly accused OPEC of driving up oil prices and, in his words, “ripping off the rest of the world.”Trump has also frequently linked American military protection for Gulf nations to oil pricing, arguing that while the United States provides security to OPEC members, those same countries take advantage by keeping oil prices elevated.Collectively, OPEC nations account for roughly 36 per cent of global oil output and hold nearly 80 per cent of the world’s proven crude reserves, according to a CNN report.For years, the UAE had advocated for a larger production quota within OPEC, reflecting its ambition to expand output capacity well beyond the limits allocated by the group.OPEC was founded in 1960 by Saudi Arabia, Iran, Iraq, Venezuela and Kuwait. The UAE became a member seven years later, joining the organisation in 1967.Today, the UAE ranks among the world’s ten largest oil producers, contributing an estimated 3 to 4 per cent of total global crude oil production.

India’s industrial production growth slowed to a five-month low of 4.1 per cent in March, weighed down by subdued manufacturing activity and near-flat expansion in the power sector amid the Middle East crisis, reported PTI.Factory output, measured by the Index of Industrial Production (IIP), had grown 3.9 per cent in March 2025, according to official data released on Tuesday.The National Statistics Office (NSO) also revised February 2026 industrial growth to 5.1 per cent from the provisional estimate of 5.2 per cent released earlier.The previous low in IIP growth was recorded in October 2025, when output had risen just 0.5 per cent.Manufacturing sector output, which carries the highest weight in the index, expanded 4.3 per cent in March 2026 compared with 4 per cent in the year-ago month.Mining production growth improved to 5.5 per cent from 1.2 per cent a year earlier.Power generation rose only 0.8 per cent in March against 7.5 per cent growth in the corresponding period last year.For the full financial year 2025-26, industrial production growth remained nearly flat at 4.1 per cent compared with 4 per cent in the previous year.Within manufacturing, 14 of the 23 industry groups recorded positive growth in March 2026 over March 2025.The top three contributors were manufacture of basic metals, which grew 8.6 per cent; manufacture of motor vehicles, trailers and semi-trailers, up 18.1 per cent; and manufacture of machinery and equipment n.e.c., which rose 11.2 per cent.Under the use-based classification, the growth rates in March 2026 over March 2025 were 2.2 per cent in primary goods, 14.6 per cent in capital goods, 3.3 per cent in intermediate goods, 6.7 per cent in infrastructure and construction goods, 5.3 per cent in consumer durables, and 1.1 per cent in consumer non-durables.