How will global energy shocks reshape India’s growth story?

India faces a rough energy landscape because global oil and gas prices remain high and supplies from West Asia are uncertain due to conflicts around the Strait of Hormuz, which carries a big share of India’s crude and almost 30 percent of its gas. This pushes up the import bill and weakens the rupee, so inflation risks rise and growth may slow by about 0.15 to 0.4 percentage points, with worst case losses above 2 percent of GDP if oil stays very expensive.

At the household and MSME level, shocks are already visible because LPG and CNG shortages are forcing rationing and higher cooking gas prices, and some cities are seeing queuing and waiting for refills. Higher fuel and power costs then feed into food prices, transport fares and school fees, so the poor feel the strain first and cut back on essentials. Frequent power gaps also hurt factories and services, and past estimates show unreliable energy already costs India nearly 2 percent of GDP each year through lost output and backup diesel use.

On the positive side, these shocks are speeding up a structural shift because India added about 50 GW of renewable capacity in 2025 and has already reached around 50 percent of installed power capacity from non fossil sources, five years ahead of its 2030 pledge. Policy is focusing on more domestic exploration under missions like deep sea drilling and on bigger strategic reserves, while also using discounted Russian crude and diversified LNG contracts to soften the blow. So over the next few years, India’s challenge will be to protect growth and the rupee in the short term while using this pressure to build a more secure and cleaner energy system for the long term.