India’s economy is currently grappling with increased inflation risks, primarily driven by the ongoing conflict in the Middle East. The Reserve Bank of India (RBI) issued a warning regarding these inflation risks in a bulletin published recently. The RBI indicated that while inflation remains contained within the established tolerance band, there are significant upside risks influenced by supply-side disruptions. It highlighted that these risks stem from uncertainties related to weather effects and the resulting impact on supply chains. Deputy Governor Poonam Gupta elaborated on the RBI's cautious stance, indicating the central bank's expectation that the Middle East conflict will be resolved in a matter of months. She emphasized that supply chains should gradually restore normalcy thereafter. Gupta also remarked that there is currently no notable evidence of “second-round effects” on inflation expectations, which justified the RBI's decision to adopt a 'watch and wait' approach. The potential impact on energy prices is contingent upon the duration of the Middle East conflict and the speed at which normal conditions return to the energy markets post-conflict. Gupta noted that efficient coordination between monetary and fiscal policies has contributed to better inflation management amid these challenges. However, there are also concerns surrounding the Indian economy's response to rising prices for petroleum products, particularly with state elections approaching. Economic forecasts indicate that India is expected to grow at a rate of 6.4% in FY27, a decrease from the previously estimated growth of 7.4% for FY26, attributed largely to the repercussions of the conflict in the Middle East. This outlook is consistent with projections from the Indian government and various multilateral agencies. Furthermore, the World Bank has estimated a growth rate of 6.6% for FY27, taking into account higher energy prices and ongoing supply chain disruptions. Despite these developments, New Delhi still ranks among the fastest-growing major economies globally, as stated in a report from the Mint newspaper.