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Informist, Tuesday, May 26, 2026

NEW DELHI – The government is alert to challenges arising out of the war in West Asia and is monitoring the impact on inflation and the current account deficit, Anuradha Thakur, secretary, department of economic affairs, said Tuesday. Even if the global situation improves in coming months, things will take time to return to normal, Thakur said, adding that "we need to move forward with preparations for the long term."  

"The impact of the West Asia war is being seen on the world economy. High oil prices and disrupted supply chains have created pressures on economic activity in several countries," Thakur said at CNBC-Awaaz's India Economic Dialogue in New Delhi. "In such a scenario, India cannot be any different from the world. India is now more integrated with the world economy than before."

Thakur said that India's foreign exchange reserves and services exports remain strong and the government's fiscal condition is better than before, all of which will support the country in tough times. "We recognise that the current account deficit is one area that we have to watch carefully because our imports are high and crude oil prices are high," she said.  

India entered 2026-27 (Apr-Mar) with a more stable macroeconomic foundation than previous episodes of global turbulence, Thakur said. The FY26 GDP growth of 7.6% was supported by capital investment, domestic demand, and the services sector, she said. "As on date, these drivers remain strong."

The banking sector also remains strong and foreign exchange reserves of near $700 billion provide enough security for India, Thakur said. High frequency indicators present a mixed picture, she said. "There are some positive signs in rural demand, but the pace of manufacturing and core sector activity has slowed down."

Thakur said the war's impact on prices is also visible, with WPI inflation rising to a 42-month high of 8.3% in April. While CPI inflation remained largely in control, at 3.48% in April, a rise in production costs could slowly affect retail consumers, Thakur said. "The government is monitoring the situation very carefully."

POLICY RESPONSE
Looking at global conditions, there is a need for an "alert and balanced" policy, Thakur said. The government recognises that as global uncertainty continues, its impact will also continue, she added. "We are alert, alive to the situation. We recognise our strengths, and also recognise where we need to work." 

The government is showing adaptability in actions and support, which will continue, Thakur said. "Continuous and sustained reforms have become the order of the day in government functioning," she said. The government will continue efforts to address the economy's medium-term structural issues and continue reforms for ease of business and ease of living.  End

Reported by Shubham Rana

Edited by Akul Nishant Akhoury

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