The report noted that the prolonged geopolitical tensions are prompting India to move beyond short-term crisis management and adopt medium- to long-term strategies aimed at safeguarding growth, ensuring energy security, and enhancing economic stability.
“India’s fiscal policy is evolving to support domestic growth,” the report said, highlighting how the country’s risk management approach is transitioning from providing immediate economic buffers to building long-term strategic resilience.
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According to S&P Global, India was already alert to risks such as rupee depreciation, foreign portfolio outflows and a fragmented global economic environment. The ongoing conflict in the Middle East has intensified these concerns, adding pressure through higher energy prices, supply disruptions and increased currency volatility.
The report pointed out that economic indicators have begun reflecting these challenges. HSBC India Composite Purchasing Managers’ Index (PMI) data for March 2026 showed a moderation in private sector activity, with the index declining to 57.0 from 58.9 in February, marking its weakest reading since November 2022.
“The sustained nature of the Middle East war is changing Indian risk management from providing immediate buffers to reorienting medium- to long-term strategies,” the report stated.To mitigate the impact of external shocks, the government has implemented a range of measures, including rationalising cooking gas allocations, resuming purchases of Russian crude oil, expanding fuel and fertiliser subsidies, and reducing excise duties on petrol and diesel. It has also established an Economic Stabilization Fund designed to act as a fiscal and financial buffer against future disruptions.
The report observed that India’s post-pandemic fiscal consolidation efforts are now facing fresh challenges. The country had reduced its fiscal deficit from 9.2 per cent of GDP in fiscal year 2021-22 to 4.4 per cent in fiscal year 2025-26. However, new spending commitments aimed at shielding the economy from rising energy and food costs may temporarily slow the pace of consolidation.
S&P Global noted that a supplementary budget of Rs 2.8 trillion announced in March 2026 addressed energy and food subsidies, while an additional Rs 1.2 trillion package unveiled in April included a Rs 1 trillion Economic Stabilisation Fund for oil hedging purposes.
“This countercyclical shift risks temporarily breaching the fiscal consolidation path,” the report cautioned.
The report estimated that the central government’s debt-to-GDP ratio could rise to 57.5 per cent from 56.1 per cent in fiscal year 2025-26, potentially delaying the government’s objective of bringing the ratio down to 49-51 per cent by fiscal year 2030-31.
Despite these challenges, S&P Global said India’s policy response reflects a broader emphasis on resilience and strategic autonomy. Fiscal measures, industrial policy adjustments and efforts to diversify energy sources are being deployed simultaneously to protect growth and reduce vulnerabilities arising from an increasingly uncertain global environment.
The report noted that India’s evolving fiscal posture demonstrates its intention to balance growth support with long-term economic stability while navigating a period of heightened geopolitical and economic risks.