New Delhi: While the Iran war has already driven Brent crude up around 9 per cent to near $80 per barrel and LNG prices by around 50 per cent in the global market, India has sufficient foreign exchange reserves, a low current account deficit (CAD) of 0.8 per cent of GDP in H1 FY26, and low inflation rates, which collectively allow it to effectively mitigate the impacts of rising global crude oil prices and ensure domestic energy security, according to the Finance Ministry’s monthly review report released on Friday.
In view of positive developments, including recent successful trade deals and consecutive strong growth of 7+ over the previous three years, real GDP growth has been upgraded to 7.0-7.4 per cent for FY27, the report pointed out.
External developments, including global growth conditions, trade dynamics, commodity price movements, and geopolitical factors, will continue to shape the outlook. Nevertheless, strong macroeconomic fundamentals and continued reform momentum position the economy well for expansion, according to the report.
The external sector is stable despite elevated global trade uncertainty. Moreover, India’s active trade diplomacy, including progress on the India-EU FTA, the India-US Interim Trade Arrangement and the India-Oman CEPA, together with Budget initiatives aimed at improving trade facilitation, logistics efficiency, and export competitiveness, is expected to diversify export destinations and strengthen external resilience over the medium term, the report stated.
The US-Israel strikes against Iran on February 28, killing its Supreme Leader Ali Khamenei and sparking retaliatory threats, has disrupted shipping through the Strait of Hormuz – world’s most critical oil chokepoint handling 20 per cent of global oil flows – and damages to key energy infrastructure assets in the Middle East, mark a pivotal escalation echoing the 1991 Gulf War oil shocks, potentially reshaping global energy geopolitics for decades, the report observed.
If the crisis persists, it could have material implications for the exchange rate and the current account deficit and could stoke inflationary pressures (which otherwise have supportive supply-side dynamics). Subdued capital flows, accentuated by a flight to safety, could put pressure on the currency. Some sectors dependent on LNG and crude, like fertilisers and petrochemicals, could be affected if the crisis is prolonged, the report pointed out.
Looking ahead, the policy framework outlined in the Union Budget 2026-27 provides a strong anchor for sustaining growth. It combines continued fiscal consolidation with sustained capital expenditure and sector-focused initiatives covering manufacturing, agriculture, MSMEs, infrastructure and human capital development. These measures are expected to strengthen productivity, investment and employment dynamics across sectors.
The report also pointed out that India’s labour market conditions have continued to strengthen, supported by improving employment trends. Budget measures focused on skilling, human capital development and sector-specific employment initiatives are expected to further support workforce participation and enhance employability.
(IANS)
