'This was not an accident...': CEA V Anantha Nageswaran on India's Gulf crisis response

When fears of a wider Gulf conflict sent shockwaves through global energy markets, many expected India to be among the worst-hit economies. As a major importer of crude oil, any disruption in the Strait of Hormuz, a key artery for global oil shipments, typically raises concerns about inflation, fuel shortages, and pressure on the rupee.

Chief Economic Adviser V Anantha Nageswaran in an editiorial in The Economic Times highlighted that the country's resilience was the result of deliberate policy choices and years of economic preparation rather than good fortune.

"This was not an accident. And it was not luck alone," Nageswaran wrote. "It was the work of a government that chose to act as it had during the pandemic, deliberately and gradually, building resilience upon another rather than reaching for a single dramatic lever."

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Government’s priorities

One of the government's priorities was protecting households from the immediate impact of rising global energy prices. Nageswaran noted that authorities absorbed part of the fuel price increase instead of passing the entire burden on to consumers.

"On the fuels that power the wider economy, the government chose to absorb the shock rather than pass it on," he wrote, adding that domestic fuel availability remained stable despite heightened geopolitical tensions. The government also implemented targeted support measures, including assistance for airlines facing higher aviation fuel costs and credit guarantees for micro, small and medium enterprises.

Diversified energy sourcing

India's ability to respond quickly was supported by a more diversified energy sourcing strategy. Domestic refiners increased output while importers secured supplies from alternative markets to offset disruptions.

"India quickly widened its sources, deepening purchases from the United States and Russia and adding new suppliers," Nageswaran explained. He added that long-term measures such as expanding natural gas networks and increasing ethanol blending also helped strengthen India's energy security.

India's broader economic fundamentals

Beyond energy management, India's broader economic fundamentals helped cushion the impact. The country entered the crisis with healthy foreign exchange reserves, a manageable current account deficit, and strong foreign investment inflows.

"The headline numbers reassure," Nageswaran wrote. "Gross foreign direct investment in the last financial year reached $95 billion, breaking out of the $70-80 billion band of the post-pandemic years." He also highlighted that India's current account deficit was only 0.6% of GDP in FY26 and is expected to remain modest in FY27.

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A test of resilience

While the conflict underscored India's continued dependence on imported energy, it also demonstrated the benefits of long-term economic planning. Nageswaran argued that the episode was ultimately a reminder that resilience is built over time.

"These tasks will demand persistence and speed," he wrote. "India must continue what it can produce competitively and do what it does best."