Early high frequency economic indicators in March 2026 are already beginning to show signs of slowing in response to the constraints created by the war in West Asia, the Ministry of Finance has said in a new report.
The Monthly Economic Review for March 2026, brought out on Saturday (March 28, 2026) by the Department of Economic Affairs (DEA) in the Ministry of Finance, noted that the evolving situation in West Asia has “introduced a complex and multi-layered set of risks for India” due to its characteristics of being a major energy importer with strong trade, investment and remittance linkages with the West Asia region.
Signs of slowing
“Early high-frequency indicators for March 2026 suggest a moderation in economic momentum, reflecting the initial impact of these global developments,” the report said. “E-way bill generation declined by 5.3% on a month-on-month basis up to March 22, indicating some moderation in goods movement, although it remained higher by 9.4% on a year-on-year basis.”
“Flash PMI [Purchasing Managers’ Index] estimates for March 2026 point to a softening in output growth following the energy price shock,” it added.
However, the report did note that, despite there being some signs of a slowdown in economic momentum, demand conditions appear “relatively resilient”.
Resilience with vigilance
“Vehicle registrations grew by 19.1% YoY up to 24 March 2026, and digital payment volume up to March 22 continued to expand in double digits,” it said. “The March 2026 round of the Rural Economic Conditions and Sentiments Survey (RECSS), conducted during the last week of February 2026 and the first week of March 2026, indicates some softening in rural sentiment; however, consumption growth strengthened in the March 2026 round.”
In this context, the report pointed out that India continues to have relatively strong macroeconomic fundamentals, which provide resilience, but added that the evolving situation warrants continued close monitoring and calibrated policy responses.
Sectors at risk
The report included a section on the macroeconomic impact on India due to India’s import dependence for oil, LPG, and even LNG, and West Asia’s criticality as a major supplier of all three. However, it also went on to speak about the impact on particular sectors.
“In several segments, particularly MSMEs and continuous-process industries like glass or ceramics, the inability to switch fuels or inputs has led to production curtailment and temporary shutdowns,” the report said. “The dual impact of non-availability and cost escalation is amplifying stress on margins and output.”
Further, it noted that shipping disruptions, rerouting, and war-risk premiums have significantly increased freight and insurance costs while transit delays have lengthened delivery cycles, hurting both imports of critical inputs and export commitments.
“Export-oriented sectors — including engineering goods, textiles, leather, and gems & jewellery — are facing reduced competitiveness due to rising logistics costs and weakening demand from Gulf markets,” the report said. “Airspace restrictions have further compounded challenges for high-value and time-sensitive cargo.”
It added that airspace closures and higher aviation fuel prices are increasing operational costs, reducing connectivity, and dampening demand for the aviation sector.
Macroeconomic impact
The DEA highlighted in its report that higher petroleum import bills, combined with increased logistics costs and reduced exports to the Middle East, could exert pressure on India’s current account.
“Additionally, potential moderation in remittance inflows — given that a significant share originates from the Gulf — poses a downside risk,” the report said.
It added that data from the Ministry of External Affairs showed that an estimated 9.2 million Indians live and work in West Asia, with the Reserve Bank of India (RBI) estimating that at least 35% of India’s annual remittances originate from West Asia.
“This implies that India’s exposure to remittances from the region is around $40 billion annually,” the report said. “These factors, alongside portfolio capital outflows, have contributed to depreciation pressures on the Indian rupee, necessitating calibrated policy responses.”
“On the fiscal side, higher subsidy requirements [fertiliser and fuel] and potential revenue shortfalls may widen the fiscal deficit, underscoring the need for expenditure prioritisation,” it added.
Published – March 28, 2026 07:18 pm IST
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