Geopolitical tensions threaten India's growth trajectory. Bernstein warns that escalating US-Iran conflict and surging crude oil prices could trigger a three to four year economic setback for India. The analysis highlights crude as a critical vulnerability, with potential inflation breaching six percent this summer and delaying monetary easing. In worst-case scenarios involving prolonged conflict, India faces double-digit inflation, GDP growth slipping to two to three percent, rupee weakening beyond 110, and Nifty declining well below 20,000. Historical parallels to the global financial crisis suggest comparable risks, when India's growth fell from ten percent to five percent and rupee depreciated thirty percent. External account pressures mount as elevated crude prices widen merchandise trade deficits and strain current accounts.
