More Stories

Informist, Tuesday, May 12, 2026

 

--CEA: West Asia war not foreign policy concern, it is a stress test 

--CEA: W Asia war has direct consequences for inflation, current account, FX

--CEA:Need to rethink how to position ourselves in structurally altered world

--CEA: Need to fix merchandise trade deficit

NEW DELHI – The consequences of the ongoing West Asia war are not temporary and the exposure is structural for India, Chief Economic Advisor to the government V. Anantha Nageswaran said Tuesday. These are not the readings of a temporary shock that will self-correct when the situation stabilises, but early-stage consequences of a sustained disruption to one of the world's most critical energy and commodity corridors, he said. "For India, the exposure is structural," he added.

 

Speaking at the Confederation of Indian Industry's Annual Business Summit on Tuesday, Nageswaran said the war is not a "foreign policy concern that occasionally bleeds into economic planning". "It is a live balance of payments stress test, with direct consequences for inflation, the current account, and the exchange rate," he added. Managing the current account credibly, financing it, and preventing further depreciation of the Indian currency are going to be important in 2026-27 (Apr-Mar), he said.

 

"India's fiscal consolidation path, infrastructure investment, and the reform record of recent years provide the foundation. But the strategic context demands more than sound macro-management. It demands a rethinking of how we position ourselves in a structurally altered world," Nageswaran said. 

 

The Strait of Hormuz has been effectively shut over the past two months after the US and Israel attacked Iran, pushing global crude prices higher by over 60%. India's import bill is expected to rise sharply since it imports over 85% of its domestic crude oil needs. This is expected to widen India's current account deficit, leading to a weaker balance of payments. 

 

Warning about the economic strain of war, Nageswaran said the government needs to rethink how the country positions itself in a structurally altered world. He said, "87% of our crude is imported, with 46% transiting through or near the Strait of Hormuz, where the seven-day moving average tanker traffic has fallen to five vessels. 60% of our liquefied petroleum gas is imported, over 90% via the Gulf. 38% of annual remittances, a figure that runs into many tens of billions of dollars, originates in Gulf countries."

 

He further said that global partnerships are going through a transition phase and the developed economies, which are dominant and the primary beneficiaries of the existing order, have their own interest in managing the pace and character of any aspirant's rights. Nageswaran cautioned that India's ascent in the global pecking order may not be enthusiastically facilitated by developed countries.

 

"The assumption that our rise will be enthusiastically facilitated by those whose current advantages it would eventually challenge requires scrutiny rather than comfortable acceptance," he said. Nageswaran also flagged that even after excluding oil and gold imports, merchandise trade deficit is high and needs to be fixed. In FY26, the merchandise trade deficit widened to $333.2 billion from $283.50 billion a year ago. End

 

US$1 = INR 95.67

 

Reported by Sagar Sen

Edited by Tanima Banerjee

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2026. All rights reserved.