Mumbai: The world could be staring at a recession within weeks if the ongoing war in West Asia doesn't ease by the middle of April, Neelkanth Mishra, chief economist at Axis Bank, warned on Thursday.

However, he said India’s medium-term growth trajectory remains intact, despite some immediate, near-term impact from the war.

“If by mid-April, the Strait of Hormuz is not opened fully, I think the world is headed into a recession,” he said at the Mint India Investment Summit & Awards in Mumbai, flagging the narrow window policymakers have to contain the fallout.

The immediate risk stems from energy disruptions and supply-chain breakdowns. India’s vulnerability is rooted in its dependence on imported energy.

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“We net import 50% of our energy… It is now a constraint to growth,” he said, adding that while this has long been a theoretical risk, it has now become a binding one.

Oil prices are unlikely to offer relief anytime soon. “Oil is unlikely to come down below $80 or $85 in the next six months,” Mishra said, warning that a sustained spike could trigger significant macroeconomic shocks.

India’s economy is likely to grow 5.9% in 2026, lower than the 6.5% estimated earlier this month, Goldman Sachs said in its report on Tuesday as it downgraded global growth forecasts to reflect higher energy prices and an expected longer disruption of energy trade via the Strait of Hormuz.

Oil is unlikely to come down below $80 or $85 in the next six months

Brent crude oil prices have shot up by over 50% since the US and Israel launched a war against Iran on 28 February. Currently, it is trading at around $106 per barrel. A surge in crude oil prices typically has a cascading effect on overall inflation in the economy.

India’s consumer price index (CPI)-based inflation is likely to be 4.6% this year, up from 4.2% estimated on 13 March, Goldman Sachs Global Investment Research said in its report, titled ‘A tighter squeeze on Asia’s energy supply’, on Tuesday.

“If we have $100 oil for one year, we will have a trade shock of $80 billion, which is 2.1% of GDP and then there is a balance of payment shock of $60 billion,” Mishra said.

Long term optimism However, despite these near-term headwinds, Mishra struck an optimistic note on India’s longer-term outlook, and said that it may be better off than some of the other countries.

“I am still not overly worried that this jeopardizes our growth over the medium term,” he said, emphasizing that domestic demand will be the primary growth engine. India’s relative insulation from global shocks also works in its favour, unlike other export-dependent economies like China, Korea, or Taiwan that are more exposed to global demand shocks.

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As India expands from a $4 trillion to a $20 trillion economy, only a small fraction of incremental growth will come from exports, he emphasised.

Instead, structural reforms, improving productivity, and a push to lower the cost of capital are expected to sustain growth. This is India’s golden age for entrepreneurship, he said, pointing to ongoing reforms in land use, labour participation, and industrial capacity.

Still, he cautioned that financial markets are flashing warning signals. “What was even more worrying was that the bond markets are starting to panic now,” he said.

Rising yields, such as US 10-year treasury yields approaching 4.5%, could tighten global financial conditions and increase stress. Yet, such market panic may be necessary as rising borrowing costs could force quicker geopolitical resolution, he said.

“Nothing is more important than financial market stress as a necessity… to get people to start behaving.”

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