Chief Economic Adviser has flagged that the ongoing surge in crude oil prices is primarily a “price shock” rather than a supply disruption, noting that the base price of crude is now significantly higher and will require policy calibration on domestic pricing.Speaking on the macroeconomic outlook, the CEA said managing the current account deficit (CAD), ensuring its financing, and preventing further depreciation in the rupee will be key priorities for FY27. The CAD, which was estimated at below 1% of GDP in FY26, is expected to rise in the current fiscal, with projections of around 2% or higher.
The adviser also cautioned that meeting fiscal targets will be challenging due to elevated petroleum and fertiliser prices, adding that the current global environment makes the situation “more difficult.” West Asia–led geopolitical uncertainty is likely to persist, further complicating the outlook.
On capital flows, gross foreign direct investment (FDI) is expected to come in at around $90 billion in FY26, with hopes of improvement in FY27. However, the CEA noted that India’s utilisation of free trade agreements has been suboptimal and private sector capital formation remains below expectations.The CEA also pointed to emerging risks on the inflation front, including the possibility of a spike due to a below-normal monsoon and pass-through of higher global prices, though the impact may be less severe than in previous cycles.Addressing structural and technological themes, the adviser said the impact of artificial intelligence on the IT sector is inevitable, but difficult to quantify at this stage, with concerns around job losses currently dominating sentiment.On the global front, the CEA warned that a potential agreement between the United States and China could pose competitive challenges for India, while emphasising the need for nimble policymaking in an increasingly complex geopolitical landscape. States, he added, have begun a “second stage” of deregulation, with more details expected in the upcoming Economic Survey.
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