New Delhi

India needs to identify and closely monitor key economic vulnerabilities, especially in areas such as energy, food, fertilisers, metals and critical minerals, and take proactive steps to manage supply disruptions and price volatility, according to Economic Advisory Council to the Prime Minister (EAC-PM) Chairman S. Mahendra Dev.

In an interview with PTI, Dev said the ongoing West Asia conflict underscores the importance of a forward-looking risk management strategy to deal with global uncertainties.

He stressed that India must build stronger buffers, including expanding strategic petroleum reserves and creating stockpiles of essential goods, instead of relying solely on foreign exchange reserves and foodgrain stocks.

Dev said reducing dependence on imports is essential and can be achieved through diversified supply chains, alternative trade routes, and better use of free trade agreements. In the long term, he added, structural transition away from fossil fuels is necessary for sustainability.

He noted that global uncertainty and repeated shocks are likely to continue, and urged India’s corporate sector to increase private investment rather than holding large cash reserves.

Highlighting recent reforms, Dev said India has improved ease of doing business and implemented several policy measures to attract both domestic and foreign investment.

Policy response to global crisis

He said the government is using a mix of fiscal, monetary, trade, and supply-side measures to cushion the impact of the West Asia conflict, along with an emergency response system developed after the Covid-19 pandemic.

Dev warned that the conflict could affect global growth through higher energy prices, supply chain disruptions, increased logistics costs, weaker trade, and lower remittances.

Since India imports about 90% of its crude oil and 50% of its natural gas, he said the economy remains exposed to global oil shocks.

Economic resilience

Despite external pressures, Dev said India’s economy remains strong due to solid macroeconomic fundamentals, including a fiscal deficit of 4.4% of GDP and comparatively lower debt levels than many other economies.

He added that the current account deficit is expected to remain manageable below 1% in FY26, though it may rise slightly in FY27.

Under a scenario where crude oil averages USD 95 per barrel, he estimated GDP growth at 6.7% with inflation around 5% in FY27. RBI projections also peg FY27 growth at 6.9% with inflation at 4.6%, assuming oil at USD 85 per barrel.

India’s FY26 growth is estimated at 7.6%.

Currency and investment outlook

On the rupee’s recent depreciation, Dev said the decline is largely due to global uncertainty and risk-averse investor sentiment, and is likely temporary rather than structural.

He noted that trade performance remained strong in March, supported by diversified export markets, helping offset external pressures.

Foreign portfolio investment is expected to return once global conditions stabilise, while FDI inflows could reach USD 90 billion in 2025–26, potentially rising further due to reforms and shifting global supply chains.

Dev said India’s investment growth reflects policy stability and investor confidence, with several states actively competing for foreign capital.

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He concluded that despite short-term volatility, India’s external fundamentals remain broadly stable.