FM Sitharaman warns: ‘West Asia crisis has evolved into systemic tremor, 2026 even more challenging’

Finance Minister Nirmala Sitharaman on Monday said that the current year, 2026, has become even more challenging as the West Asia conflict evolved into a “systemic tremor” but underlined that India continues to stand out on the back of policies for strong fiscal management.

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Addressing the Golden Jubilee celebrations of the National Institute of Public Finance and Policy, the finance minister noted that the year 2025 was monumental in more ways than initially thought, as trade fragmentation introduced severe uncertainty into global supply chains.

“This led to sharp downward revisions in global growth forecasts, but the year ended more optimistically than previously perceived, particularly for India,” she said.

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However, she said that this current year is even more challenging as we move from a landscape of ‘shocks’ to one of ‘permanent volatility.’ “The escalation of the Middle East conflict has evolved from a regional security concern into a systemic tremor, threatening the vital arteries of global energy and hardening the lines of a new, multipolar world order,” the finance minister noted.

Highlighting that the global economy is witnessing volatility, uncertainty, complexity, and ambiguity, and public debt has surged, she said that India faces both external and internal challenges as it works toward the goal of a “Viksit Bharat,” noting that factors such as the monsoon remain key domestic concerns.

However, while global public debt has surged to approximately $106 trillion — exceeding 95% of global GDP, the finance minister underlined that India continues to stand out. “Our general government debt-to-GDP ratio (which includes states’ debt), at approximately 81%, is the lowest among major economies after Germany,” she said, adding that India is the only major economy where the IMF projects this ratio to fall significantly — to 75.8% by 2030.

“A decade ago, our economy was one of the ‘Fragile Five’. We begin the quarter of this century as the fastest-growing major economy in the world,” she further said.

She further said that India has fiscal space and room to expand capital expenditure, noting that the Reserve Bank of India has scope to cut interest rates and offer targeted support to affected sectors.