New Delhi – India's economic trajectory faces a significant shift due to the ongoing surge in crude oil and petrochemical product prices, Chief Economic Adviser (CEA) V Ananth Nageswaran cautioned on May 2, 2026. Speaking at the ICPP Growth Conference hosted by Ashoka University, Nageswaran highlighted that the West Asia conflict is largely responsible for what he termed a 'price shock' for India, rather than a supply disruption.
The CEA noted that while the Indian economy was anticipated to maintain a robust 7% plus growth rate, the current inflationary pressures have introduced new challenges. He identified four primary channels through which the conflict's macroeconomic impact would manifest: direct price shocks, trade disruptions, increased logistics costs, and fluctuations in remittances.
Current Account Deficit Projected to Widen
A key concern articulated by Nageswaran is the potential widening of India's current account deficit (CAD). Having been less than 1% of the GDP in FY26, the CAD is now projected to increase to approximately 2% this fiscal year. Managing this deficit and preventing a further depreciation of the Indian rupee are critical priorities for the government, he stated.
Despite these challenges, Nageswaran expressed optimism regarding India's free trade agreements (FTAs). He emphasized that these agreements are instrumental not only in providing access to foreign markets but also in exposing Indian businesses to global competition, fostering greater competitiveness and positioning India as a global manufacturing hub.
Navigating Global Price Volatility
While acknowledging India's dependence on imported oil, the CEA dismissed concerns over the nation's ability to manage supply and availability. However, he pointed out that exploring alternative energy sources would present its own set of pricing challenges. The government's focus remains on mitigating the impact of internationally determined prices on the domestic economy.