India’s economic and policy leadership is bracing for the fallout from the West Asia war, with senior officials cautioning that elevated oil prices and supply disruptions could strain inflation, the current account and the rupee. At an industry conference in New Delhi, ministers and officials pushed for tougher fiscal discipline, deeper deregulation and a shift toward globally competitive manufacturing.
At the Confederation of Indian Industry’s annual business summit on Tuesday, petroleum minister Hardeep Singh Puri pointed to the stress on state-owned fuel retailers from the global energy shock, which chief economic adviser V. Anantha Nageswaran said poses a “live macroeconomic stress test”. Niti Aayog member and chair of a high-level panel on regulatory reforms Rajiv Gauba said India’s next set of economic reforms must be granular, while industry minister Piyush Goyal said the current global environment must be seen as a “wake-up call”.
On Sunday, Prime Minister Narendra Modi to place the “nation first above personal comfort” and take steps such as using energy with restraint, conserving resources and delaying non-essential foreign travel.
According to Nageswaran, who spoke on the occasion, the ongoing West Asia crisis has direct implications for India’s inflation, current account and exchange rate. He said managing the current account credibly, financing it, and preventing further currency depreciation, are the central macroeconomic imperatives of FY27, adding that India’s fiscal consolidation path, infrastructure investment, and the reform record of recent years provide the foundation.
Assumptions supporting the post-1945 global economic order—for example, capital flowing to its most productive uses and technology spreading through commercial relationships and multilateral rules-based systems are under now serious pressure, he said.
Minister Puri said elections and fuel price revisions are unrelated and that at some point in time, the government will have to decide how long the state-run companies can take losses. Puri said lose ₹1,000 crore a day due to high energy prices. Given the supply chain disruption, India will have to stock more of oil and liquefied gas, he said.
“How long will the oil companies be able to take it? Frankly, that’s something that worries me. I mean, there have been times when the oil companies have done exceptionally well. But the rate at which we are going, this one quarter of losses may wipe out the entire profit after tax of last year, which was about $28 billion or something,” he said.
The industry must focus on , improving productivity and lowering the country’s import bill to collectively strengthen the economy, commerce and industry minister Piyush Goyal said at the event, adding energy efficiency measures have helped save nearly $10 billion annually. Goyal said the current global environment should be viewed as a wake-up call for India to become more efficient, productive and self-reliant.
Reforms
Gauba said economic prosperity is the best foreign policy, providing a country with leverage and the best insurance for security, both internal and external. India needs to sustain its high economic growth momentum for many, many years to come, he said. Gauba said that although the country dismantled industrial licensing in 1991, the license raj continued. “Licensing re-emerged by proxy in many areas. Every permission required before a firm can be established and can start working, is a license by another name,” Gauba said.
Cleansing the system of ‘regulatory cholesterol’ with comprehensive deregulation is critical so India can bridge the gap between its potential and what is realized, he said. Since 2014, over 42,000 compliances have been eliminated and 3,700 provisions decriminalized. This exercise has to be carried to its logical conclusion, he said.
“What is needed now is nuts-and-bolts reforms: the unglamorous, the granular, but vital change for businesses to open, operate, and shut down when necessary. The next-generation reforms must make a clean, decisive break from the colonial mindset of distrust of citizens and punishment even for small violations to trust-based governance.” Gauba said a committee he headed has suggested that licensing should be required only for national security or activities that pose risks to health or the environment.
Automatic self-registration should be the norm, and licenses where necessary, should have perpetual or at least long-term validity. There should be no requirement for frequent renewals. Inspections should be risk-based and conducted by accredited third parties as a norm, not by government inspectors, he said. This marks a paradigm shift from “prohibited unless permitted” to “permitted unless prohibited,” Gauba said.
The official also said that Indian industry needs to shed its instinct for protectionism. “The Government has entered into landmark trade agreements with the UK, EU, and New Zealand. Many others are on the anvil. These will open vast new markets to Indian exporters. But the logic of free trade requires reciprocity.”
Changing equations
Nageswaran said global powers tend to ensure that their terms of engagement remain calibrated to their interest. “The assumption that our rise will be enthusiastically facilitated by those whose current advantages it would eventually challenge, require scrutiny rather than comfortable acceptance,” he warned.
On trade agreements, Goyal said the nine free trade agreements signed in the last three-and-a-half years with 38 countries are all with developed economies and would help India attract investments and expand exports by providing access to large global markets with significant import demand.
Calling upon industry to work towards the target of $2 trillion exports over the next five to six years, the minister said the goal was achievable with annual export growth of around 15%.
He also urged businesses to move from “assembled in India” to “designed, engineered and manufactured in India”, while stressing that quality should be non-negotiable and Indian manufacturing standards must rise to global levels.