The combined impact of West Asia’s conflict on India across growth, inflation, the fiscal balance, and external balances is likely to be significant, V Anantha Nageswaran, Chief Economic Advisor, said in the monthly economic review released on Saturday. The review said that the economy showed early signs of moderation in economic activity.
“The data reflect that the recent shocks are being transmitted through higher input costs, supply constraints, and pressures across sectors, with early indications of some moderation in economic activity,” the review said.
It said that early high-frequency indicators for March 2026 suggest a moderation in economic momentum, reflecting the initial impact of these global developments.
Nageswaran said that India will need to provide immediate relief to the most affected and vulnerable businesses and households while generating fiscal space to meet strategic and long-term needs, such as the need to build long-term buffers in several commodities and materials, not just energy-related ones.
“Given the considerable impact of the conflict on India’s economy, we should leverage the fallout to redouble our recent reform efforts to enhance India’s competitiveness and preparedness,” Nageswaran said in the preface to the monthly economic review for March.
The review, authored by officials of the Department of Economic Affairs in the finance ministry, warned of the risks of elevated global crude oil prices to the merchandise trade balance. “A sustained elevation in oil and gas prices could lead to broader second-round effects through input cost pass-through across sectors,” the review said.
“The geopolitical developments have introduced a complex and multi-layered set of risks for India, given its position as a major energy importer with strong trade, investment, and remittance linkages with the West Asia region,” the review said.
The monthly review also highlighted that the near-term outlook for the economy remained uncertain, with external shocks posing downside risks to growth through higher input costs and supply constraints, even as domestic demand may help cushion the impact.
The government on Friday announced heavy relief for oil companies, cutting additional excise duty on petrol and diesel by ₹10 per litre to shield consumers and oil marketing firms from rising crude prices.
The government reintroduced export duties on diesel and aviation turbine fuel (ATF) to ensure their adequate availability in the domestic market. A duty of ₹21.5 per litre has been levied on diesel exports, while ATF exports will attract a duty of ₹29.5 per litre, up from nil.
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