India Sees Renewed Fiscal Risks From Middle East Impasse

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Or sign-in if you have an account.The Ministry of Finance in New Delhi, India, on Sunday, Feb. 1, 2026. India's Finance Minister Nirmala Sitharaman is expected to prioritize job-creating growth while emphasizing fiscal prudence in Sunday's budget, as the country grapples with geopolitical risks and steep US tariffs. Photographer: Prakash Singh/Bloomberg Photo by Prakash Singh /Bloomberg(Bloomberg) — India’s finance ministry warned that renewed oil price shocks from a prolonged Middle East conflict remain a key risk to India’s fiscal and current accounts, underscoring the challenges facing policymakers as geopolitical tensions persist.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountThe economy remains resilient, supported by structural reforms and infrastructure investments over the past decade, but “upside risk to inflation, fiscal and current account deficits and downside risk to growth remain in the wake of persistent stand-off in the Gulf region,” the ministry said.Brent crude has swung sharply this month, initially surging after hostilities between the US and Iran resumed and the conflict spread to the Red Sea before retreating as tensions eased in recent days. The volatility has kept the rupee under pressure, fueling concerns over India’s import bill.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againThat has complicated the task for policymakers. The government must contain pressure on public finances, while the Reserve Bank of India balances inflation risks against the need to support growth.Bloomberg News reported in June that officials were preparing for the fiscal deficit to widen by as much as half a percentage point to 4.8% of gross domestic product in the fiscal year ending March 2027 if elevated oil prices persisted.On Sunday, Finance Minister Nirmala Sitharaman said that the government is not considering revising its budget estimates, saying India has sufficient buffers to withstand pressures stemming from the Middle East conflict.While resilient domestic demand should continue to underpin economic activity, renewed geopolitical tensions and commodity price volatility continue to cloud the outlook, the ministry said.As global challenges show no sign of easing, India will have to adapt its policy responses “to global imperatives if it has to achieve strategic leverage,” it said.The ministry also warned that inflationary pressures have become more broad-based. Unfavorable weather has pushed up food prices, while higher global fuel costs have begun feeding through to retail energy prices, spreading price pressures across a wider range of consumer goods.Consumer inflation accelerated last month, rising above the Reserve Bank of India’s target for the first time in nearly a year and a half as food and fuel prices strengthened.The RBI also flagged the Iran conflict and a deficient monsoon as risks to the outlook in its monthly bulletin earlier this month. The central bank is widely expected to leave the benchmark interest rate unchanged at their Aug. 5 policy meeting.(Adds more details throughout)This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.