India’s fiscal situation is coming under pressure after the West Asia crisis, with Expenditure Secretary V Vualnam warning that uncertainty is rising. He said the macro environment has shifted quickly and the coming quarters will be very difficult with multiple stress points.
Revenue concerns are also building. Petrol and diesel prices have remained unchanged since April 2022, but excise duty cuts are hurting government earnings. Oil marketing companies are facing losses as global crude prices rise, even though retail prices have stayed stable.
Subsidy burden is expected to increase sharply. Fertiliser subsidy may overshoot by around Rs 50,000 crore in FY27 due to higher global prices and supply disruptions linked to the West Asia situation.
Despite rising pressure, the government has said it will continue its focus on capital expenditure. Officials believe maintaining capex is important even in the current uncertain environment.
NK Singh has raised concerns about the broader outlook, saying the earlier Goldilocks phase may be over. He added that tax buoyancy is now a big question going forward.
DIPAM Secretary Arunish Chawla said India must build long term strength in agriculture, manufacturing, and deep tech. He added that the jobs outlook remains strong despite current data concerns.
At the same time, fuel price hikes are under consideration. Government sources indicate petrol and diesel prices may rise by Rs 4 to Rs 5 per litre, while LPG could increase by Rs 40 to Rs 50. A final decision is expected within 5 to 7 days as global crude prices surge.
Oil marketing companies have not increased petrol and diesel prices yet, even as global crude has surged. However, prices of commercial LPG, jet fuel, and industrial diesel have already been raised.
India’s April economic report flags oil near $113 to $115, trade deficit at $333 billion, CPI at 3.4%, and credit growth at 17.1%. The report says growth is around 6.5% but risks are rising, with oil prices higher than earlier assumptions and pressure building on inflation and overall sentiment.
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