As the conflict in West Asia continues and concerns grow over global energy supplies, India’s Chief Economic Adviser (CEA) V Anantha Nageswaran has said the country’s economy remains resilient for now. However, he warned that a prolonged disruption in oil markets could pose risks to growth, inflation and government finances.
In an exclusive interview with India Today, Nageswaran said India is in a stronger position than many fear, thanks to stable economic indicators, healthy foreign exchange reserves and easing oil prices. At the same time, he stressed that the biggest uncertainty remains the impact of the ongoing conflict on global energy markets.
Nageswaran said the risk assessment for India has not changed significantly since the conflict began.
According to him, one positive development is that crude oil prices, which had surged immediately after the crisis started, have since fallen back close to earlier levels. He also noted that India’s economic data for March and April showed resilience despite global uncertainties.
However, he cautioned that if the conflict continues for several more months, oil production and refining activities in the Gulf region could remain disrupted.
“The biggest worry is what happens to crude oil prices if the conflict stretches into the second half of the year,” he said.
Asked about the long-term impact of the war, Nageswaran said a prolonged disruption could hurt not only India but the global economy as well.
He said if oil production remains affected and shipping routes continue to face uncertainty, economic growth could slow. In a worst-case scenario, India’s growth rate could fall below 6%.
While he declined to predict oil prices, he acknowledged that estimates ranging from $120 to $160 per barrel are being discussed globally if the conflict worsens.
Nageswaran explained that a sustained rise in oil prices affects the economy in several ways.
Higher crude prices increase costs for industries, transport and businesses. These costs may either be absorbed by the government, oil companies or passed on to consumers through higher prices.
If the government chooses to absorb part of the burden, it could affect fiscal calculations and borrowing requirements. If consumers bear the cost, inflation may rise and household spending could come under pressure.
“One way or another, higher oil prices eventually impact growth, inflation and economic activity,” he said.
Responding to questions about Prime Minister Narendra Modi’s recent caution regarding gold consumption and imports, Nageswaran said the message should be seen as a broader appeal to reduce avoidable imports.
He said the government’s focus is on strengthening foreign exchange reserves and limiting unnecessary outflows of foreign currency.
However, he acknowledged that Indians have a deep-rooted cultural attachment to gold, which goes beyond economic conditions.
“Gold has long been viewed as an important financial asset and source of security for households,” he said.
Sectors such as aviation, fertilisers and MSMEs (Micro, Small and Medium Enterprises) were among the first to raise concerns after the conflict began.
Nageswaran said the government has already introduced support measures, including emergency credit schemes and relief for some industries.
He added that additional support could be considered if the situation worsens, but the government prefers a measured approach rather than introducing large-scale interventions too early.
Drawing a comparison with the Covid period, he said policy responses should match the scale and duration of the crisis.
One area where India remains comfortable is its foreign exchange reserves.
Nageswaran said India’s reserves currently cover nearly 11 months of imports, providing a strong buffer against external shocks.
“We are nowhere near a situation like 1991,” he said, referring to India’s balance of payments crisis.
He added that recent measures aimed at boosting reserves were precautionary steps designed to further strengthen India’s position.
On the weakening rupee, Nageswaran said India is not an exception.
He pointed out that several Asian currencies, including the Japanese yen, South Korean won, Indonesian rupiah, Thai baht and Philippine peso, have also weakened against the US dollar over the past year.
According to him, investors remain cautious about Asian economies because of global uncertainties and higher oil prices.
“The rupee is acting as a shock absorber, much like other Asian currencies,” he said.
Nageswaran said households should recognise that the world is facing a broader energy, fertiliser and gas supply shock.
As a result, higher prices could affect household budgets and spending power in the short term.
He stressed, however, that this is not a challenge unique to India and is being faced by economies across the world.
On concerns about weather-related disruptions, Nageswaran said reservoir levels remain well above normal and Indian agriculture has become more resilient over the years.
While there are concerns that El Nino conditions could strengthen later in the monsoon season, he said the government has shown its ability to manage food supplies through imports, stock management and export controls when required.
He expressed confidence that adequate food supplies would remain available at affordable prices.
Summing up the risks facing the economy, Nageswaran said energy prices and energy supplies remain the biggest concern as the conflict drags on.
The longer the uncertainty continues, the greater the risk to oil markets, inflation and economic growth.
For now, he believes India’s economy remains resilient, but much will depend on how the global energy situation evolves in the coming months.