Iran war: The central government is preparing for a more conservative growth outlook for FY27 as continuing tensions in West Asia threaten to drag economic momentum through higher energy prices and external uncertainties.

While official projections remain broadly optimistic, sources told Business Today that policymakers are increasingly factoring in downside risks, with internal assessments indicating that a downward revision may be considered.

Some officials suggest growth could be marked closer to the 6.3-6.5 per cent range if external pressures persist.

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The Economic Survey of India had projected real GDP growth at 6.8-7.2 per cent for FY27, supported by strong domestic consumption, investment, and a recovery in manufacturing. However, evolving global conditions are prompting a reassessment of these assumptions which were released late January.

At the core of the concerns is the impact of elevated global energy prices, which could push up inflation, erode household purchasing power, and dampen consumption. Higher crude prices are also expected to complicate fiscal management, as the government may need to step up additional subsidy outlays to shield consumers from price shocks.

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The Centre’s total expenditure for FY27 has been pegged at Rs 53.5 lakh crore, with non-debt receipts estimated at Rs 36.5 lakh crore and net tax revenues at Rs 28.7 lakh crore. However, the West Asia conflict, which broke out shortly after the Budget presentation, has led to a surge in oil, gas, and fertiliser prices, all of which have a direct bearing on subsidy requirements.

Officials in the Ministry of Finance said there is growing recognition within the government that external headwinds could be stronger than previously anticipated, with risks to growth now clearly tilted to the downside. Increased spending on fertiliser and fuel subsidies, in particular, could put pressure on the fiscal deficit trajectory. The government has pegged the fiscal deficit for FY27 at 4.3 per cent and forecast the debt ratio to decline to 55.6 per cent.

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Even as policymakers turn more cautious, global institutions such as the International Monetary Fund and the World Bank continue to peg India’s FY27 growth at around 6.5-6.6 per cent.

Published on: Apr 28, 2026 2:35 PM IST