Gita Gopinath, Harvard University professor and former IMF Deputy Managing Director, has warned that a prolonged Iran conflict could expose India to a potential "food, fuel, and fertilizer" shock. She, however, said that the immediate impact may remain limited if tensions ease quickly.

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The current crisis marks "the biggest oil shock to the world," and it is "bigger than what we saw during the 1970s," the professor said in an exclusive conversation with India Today TV. 

Gopinath said global growth could be hit depending on how long the conflict persists. "If everything gets resolved in the next week or so, we're talking about global growth being lower by about .3 percentage points," she said

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However, if oil prices rise to around $100, global growth could fall sharply to 2.5%, compared to 3.4% without the conflict.

For India, she said the impact of the Iran conflict is partly offset by recent tariff reductions. "The Iran conflict was a negative shock for India. But on the other hand, tariffs coming down from 50% to 10% was a positive event," she said, adding that the overall effect is "a bit of a wash," with growth expected at around 6.5% this fiscal year.

However, she warned that a prolonged disruption could have deeper consequences, particularly given India's reliance on West Asia for oil and fertilisers. 

"If there is much more disruption and because India relies on the Middle East so much for oil and for its fertilizers - it's not just about the price effect - if you just don't have the supply, for example, LPG - that is going to complicate production in India and going to be much more consequential," she warned. 

On fuel prices, Gopinath cautioned that government support cannot continue indefinitely. "I don't think it's sustainable for the Indian government to continue to subsidize fuel prices for a very long time," she said, noting the impact on the fiscal deficit. "Given the impact on the fiscal deficit, at some point, they will have to pass through some of that into what prices consumers pay. May not be the full amount, but certainly more than what's happening at this moment."

She added that while fertiliser supplies are currently supported by long-term contracts, any prolonged blockage of Hormuz could disrupt availability. "Then you're not even going to get the supplies. That's the bigger damage," she said. "And if this continues for much longer, it's usually not just food, fuel, and fertilizers. The problem is that financial conditions could tighten much more than what we've seen right now in the world, including the pressure on the rupee."

Gopinath identified the current account and balance of payments as the immediate pressure points for India. "Given that India is a big importer of oil, it's going to affect the size of the current account," she said, adding that limited foreign capital inflows could exacerbate the strain. 

Despite the risks, Gopinath said India retains some resilience due to strong domestic demand. "The plus for the Indian economy is that it is a large domestic market," she said, while also pointing to weaker monsoon expectations and the potential impact of AI on BPO sectors as additional concerns.

She said the overall economic impact will depend on how quickly the conflict is resolved, with longer disruptions posing significantly greater risks.

Published on: Apr 22, 2026 2:39 PM IST