Govt confident of meeting fiscal deficit target despite West Asia shock, cites easing crude prices

The Centre has expressed confidence that its fiscal consolidation roadmap remains on track despite the recent conflict in West Asia, with Finance Minister Nirmala Sitharaman ruling out any immediate revision to the Union Budget assumptions and the Finance Ministry telling Parliament today that easing crude prices and calibrated policy interventions have helped preserve macroeconomic stability.

Speaking at a media event in Mumbai on Sunday, Sitharaman said the government was not planning to reconsider its Budget estimates for now, asserting that India had sufficient buffers to absorb pressures arising from the conflict in the Middle East. She added that the government had "some resource kept aside" to deal with higher war-risk insurance costs for ships transiting conflict zones.

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The government's assessment was reinforced in a written reply tabled in the Lok Sabha today, where Minister of State for Finance Pankaj Chaudhary said the Indian crude basket had fallen sharply from USD 114.5 per barrel in April 2026 to USD 77.6 per barrel as of July 22, easing pressure on the country's current account balance.

The Finance Ministry said the government had undertaken calibrated revisions in the special additional excise duty on petrol and diesel, along with customs duty adjustments, to cushion the economy from global energy price volatility while preserving fiscal space. It also reiterated the Reserve Bank of India's FY27 projections of 6.6% GDP growth and 5.1% inflation, while acknowledging that global commodity prices continue to pose risks.

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The parliamentary reply outlined a series of contingency measures adopted by the government, including diversification of crude import sources, maintenance of strategic petroleum reserves, advance fertiliser procurement, temporary customs duty exemptions on critical imports, restoration of export incentives under the RoDTEP scheme and operationalisation of the Bharat Maritime Insurance Pool RELIEF Scheme to support trade during periods of geopolitical uncertainty.

The ministry also identified sectors such as chemicals, plastics, textiles, pharmaceuticals, automotive components and manufacturing as particularly vulnerable to energy price volatility and said they were being closely monitored.

The government's latest assessment comes as concerns over a prolonged oil price shock have moderated following the easing of tensions in West Asia, strengthening expectations that the Centre can adhere to its FY27 fiscal deficit target of 4.3% of GDP.