Rise in crude oil, petrochemicals & petroleum product prices has changed the economic outlook: CEA

Chief Economic Adviser V Anantha Nageswaran on May 2warned of a price shock emanating from the West Asia conflict and said that the current account deficit could widen this fiscal to around 2%.

Addressing the ICPP Growth Conference by Ashoka University, Nageswaran said the conflict has come at a time when the economy was expected to grow at 7% plus rates for another year.

“But the rise in crude oil, petrochemicals and petroleum product prices has changed the outlook. However, this is largely a price shock and not a supply shock for India and we are managing supply and availability, even though prices are internationally determined,” he said, adding that the major macroeconomic impact of this conflict will play out through four channels – price shocks, trade, logistics costs, and remittances.”

His comments come at a time when there are rising concerns over economic prospects this fiscal with surging global crude oil prices seen to be a drag on the economy and the Exchequer.

While dissuading concerns over India’s dependence on imported oil, he pointed out that alternatives would also have challenges in terms of pricing. He also underlined that managing the current account deficit and preventing a further fall in the rupee would be key priorities of the government in the current fiscal.

The CAD, which was at less than 1% of the GDP in FY26 is likely to rise this fiscal and projected at about 2%.

He however, underlined that the free trade agreements signed by India would have a positive impact. “These free trade agreements give us access to foreign markets and, more importantly, expose our businesses to competition — helping them measure up and become more competitive,” he said, adding that they will position India not only as a global manufacturing hub but also ensure that we do so in a competitive manner.