The prolonged West Asia crisis has led to fiscal stress and uncertainty, but the government remains committed to the budgeted ₹12.22 lakh crore capital expenditure in the current fiscal, Expenditure Secretary V Vualnam has said.
The upcoming few months, the next quarter and the year ahead would be very difficult to envisage with lots of possible stress points, he stressed
“So, the fiscal stress is indeed very much a reality, but at the same time the priority sectors... the capex would really be a priority item which we would like to preserve and ensure that it continues at the budgeted level,” Vualnam said at the ICPP Growth Conference organised by the Ashoka University.
Fiscal prudence
On a positive note, the Secretary highlighted that fiscal prudence has put India on a very good footing in the current unpredictable times.
Focus areas for the government’s capital expenditure in FY27 are highways, railways, shipping, ports and urban development sectors, the Expenditure Secretary said..
The current global uncertainties have created a challenging situation for India, and the government has been proactive in trying to tackle each situation with agility, he noted.
India’s fiscal prudence has put the country on a very good stead in the current unpredictable times, he added.
“We will, on our part, be committed to see that the required funds are provided in spite of all the stress points that may come up,” he said.
Fiscal deficit
The FY27 Budget has pegged the fiscal deficit at 4.3 per cent of GDP, which is now seen at 4.5 per cent of GDP, following a downward revision in India’s nominal GDP under the new series.
To contain retail prices of petrol and diesel from rising amid the ongoing West Asia war, the government has cut excise duties, which poses a risk of fiscal slippage. The excise duty cut is estimated to cost ₹7,000 crore to the exchequer for 15 days.
Since the beginning of the war in West Asia on February 28, crude oil prices have soared to a four-year high of $126 per barrel on Thursday from about the $73 level before the war.
“The next few months, the next quarter and the coming year are indeed very difficult to envisage, lots of possible stress points,” he said.
Tax buoyancy will also have been looked out for amidst these conditions, Vualnam said, which can further squeeze fiscal space.
India imports 60 per cent of its LPG usage, and of that, 90 per cent flows through the now closed Strait of Hormuz, the Secretary said, adding that it would be a “very challenging situation”.
The government has also levied an export duty of ₹23 per litre on diesel and ₹33 per litre on aviation turbine fuel to ensure adequate domestic availability of the fuels. These duty changes are being reviewed by the Centre every
Published on May 1, 2026