MUMBAI: Chief Economic Advisor to the Government of India, Dr V Anantha Nageswaran, has said that the West Asia conflict has altered the country’s growth outlook.
Speaking at the ICPP Growth Conference organised by Ashoka University on Saturday, Nageswaran said, “This conflict has come at a time when we were confidently anticipating another year of 7%+ GDP growth, but the rise in crude oil, petrochemicals, and petroleum product prices has changed the outlook.”
He noted that this is largely a price shock rather than a supply shock for India, and that the government is managing supply and availability, even though prices are internationally determined. “The major macroeconomic impact of this conflict will play out through four channels—price shocks, trade, logistics costs, and remittances,” he said during his address.
The CEA further stated that the current account deficit (CAD) in the current fiscal could rise to over 2% of GDP, up from less than 1% in FY26.
Nageswaran also said India needs to create strategic buffers in the face of the “most difficult” energy shock the country is experiencing amid the West Asia crisis. He added that rising global prices of fertilisers and petroleum products due to the conflict will make it challenging to achieve the 4.3% fiscal deficit target for the current fiscal. A below-normal monsoon and the pass-through of higher energy prices could also lead to a potential inflation spike.
He further highlighted that India faces an employment challenge stemming from AI, and stressed the need to ensure that the IT sector becomes more competitive, avoids job losses to AI, and instead creates jobs that utilise AI within the sector or in other services.
Offering an optimistic outlook, while highlighting the potential impact of the multiple Free Trade Agreements signed by India recently, Dr Nageswaran said, “These free trade agreements give us access to foreign markets and, more importantly, expose our businesses to competition—helping them measure up and become more competitive. They will position India not only as a global manufacturing hub but also ensure that we do so in a competitive manner.”
