India's economy faces significant headwinds from Middle East conflict. The Chief Economic Advisor warned of substantial impacts on growth, inflation, fiscal balance, and external accounts as geopolitical tensions disrupt energy markets and supply chains. While economic activity remained robust through February with strong manufacturing, services, and consumption indicators, March data shows early signs of moderation. High-frequency indicators including e-way bill generation and flash PMI estimates reflect sequential slowdown. Rising energy, freight, and insurance costs are creating cost-push pressures across import-dependent sectors. Demand remains resilient with continued growth in vehicle registrations and digital transactions, but supply-side constraints are emerging as the primary concern.
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