India’s Chief Economic Advisor V. Ananth Nageswaran has indicated that revised growth and fiscal deficit estimates will only be possible after assessing first-quarter data alongside upcoming policy decisions, amid rising global uncertainty.On the growth outlook, Nageswaran said the earlier estimate of over 7% growth for FY27, announced on February 27, “now feels like aeons ago”, reflecting the sharp shift in global conditions.
The CEA said both growth and fiscal deficit projections will be reassessed once there is greater clarity from Q1 data and policy actions.
Fiscal deficit under pressureHe cautioned that maintaining the fiscal deficit at 4.3% could prove challenging given the sustained uncertainty stemming from the West Asia crisis and its impact on crude oil, petroleum products and fertiliser prices.“Naturally, this number will be under challenge given what’s happening to fertiliser and petroleum product prices. I need to see at least one quarter of data and some policy decisions before we can estimate where growth or fiscal deficit will settle for the full financial year,” Nageswaran said.CAD may cross 2% of GDPNageswaran also flagged risks to the external account, noting that India’s current account deficit could widen from under 1% of GDP to around 2% or higher in FY27, driven by elevated import costs and potentially lower remittances.He added that financing a higher CAD could become more challenging if foreign direct investment inflows remain subdued, as seen over the past two years.Inflation spike likely to be containedOn inflation, however, the CEA struck a relatively optimistic note. While acknowledging the likelihood of a spike due to higher fuel costs and a below-normal monsoon, he said it may not reach the elevated levels seen globally in recent years.Fuel pricing to be a ‘balancing act’On fuel price revisions, Nageswaran said decisions would involve a careful “balancing act” between the government, oil marketing companies (OMCs) and households.Also Read: India’s factory growth stays sluggish in April amid war-led soaring costs, PMI shows“There is already some pass-through happening, as seen in commercial LPG prices, excise duty adjustments and export duties on diesel and ATF,” he said.“In our own way, we are arriving at a modus vivendi in terms of burden-sharing between fiscal policy, households and OMCs. It has to be a balancing act, and we are beginning to see signs of that from a policy perspective.”Officials indicated that a portion of higher fuel costs may need to be passed on to consumers, especially if disruptions around the Strait of Hormuz persist beyond the near term.
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