Chief Economic Advisor V Anantha Nageswaran on Saturday said that the current crude scenario poses a price shock, not a supply shock. He also cautioned that while the current account deficit could widen, budget estimates of fiscal deficit would be under challenge.
“Many of the petrochemicals, petroleum products and the base crude oil that we import are much higher than what they were in early in February and compared to earlier. But based on the inputs from Ministry of Petroleum and Natural has. this is only a price shock and not a supply shock also for India, which may be the case for others,” Nageswaran said at the ICPP Growth Conference, organised by Ashoka University.
Four channels of economic impact identified
He listed four channels of shocks, including the oil price channel. Then there is also an impact on trade in general. “As global growth slows down and the Gulf economies slow down, you have a trade impact. Then you have the logistics cost pack, which are going to be sticky,” he said. Normally, they don’t come down that easily once they go up, and the uncertainty will remain. Therefore, insurance and freight costs will not necessarily return to pre–February 28th levels.
“Then the remittance shock given. We get $120 billion in remittances in general of which $30-40 billion comes from Gulf region. You could come up with your own estimate of how much will be lost, which will be only a guesstimate at this point,” he said.
CAD likely to widen, rupee stability key
Further, the CEA said managing the current account deficit (CAD), ensuring its financing, and preventing further depreciation in the rupee will be key priorities for FY27. The CAD, which was estimated at below 1 per cent of GDP in FY26, is expected to rise in the current fiscal, with projections of around 2 per cent or higher.
FDI outlook remains resilient
On the issue of FDI, Nageswaran said that FY26 might close with a gross FDI figure of about 90 or 95 billion dollars, which is an important sign that investors have not given up on investing in India or viewing India as an investment destination. And the spate of free trade agreements which were signed, some of which will come into effect this year. The UK one, hopefully, this month in May, and the EU agreement sometime, hopefully, before the calendar year is out. “Those things also will hopefully convince global manufacturers that India isn’t facing high tariffs along with the interim agreement with the United States. So therefore, to some extent, India as a center of production, both for the domestic market and for the global market,” he said.
Fiscal deficit target may face pressure
CEA assured that India is better prepared than many other countries because we have some fiscal leverage. Because “we have brought down our gross fiscal deficit ratio to 4.4 per cent as of last year, and in FY27 we budgeted 4.3 per cent. This number will be under challenge given what is happening to fertiliser prices, oil prices, petroleum product prices, etc. I am not going to give you numbers in case you are looking for it,” he said
Published on May 2, 2026