He said 87 per cent of India’s crude requirement is imported, of which 46 per cent is transiting through or near the Strait of Hormuz, where the seven-day moving average tanker traffic has fallen to five vessels. 60 per cent of our LPG is imported, over 90 per cent via the Gulf. 38 per cent of annual remittances originate in Gulf countries.
“The West Asia crisis, therefore, is not a foreign policy concern that occasionally bleeds into economic planning. It is a live balance of payments stress test, with direct consequences for inflation, the current account, and the exchange rate.
“Managing the current account credibly, financing it, and preventing further currency depreciation are the central macroeconomic imperatives of FY27,” Nageswaran said, adding that India’s macroeconomic foundations, the fiscal consolidation path, infrastructure investment, and reform record, provide a base from which the country can navigate this environment effectively.
The Strait of Hormuz has been effectively shut over the past two months after the US and Israel attacked Iran, pushing global crude prices higher by over 60 per cent. India’s import bill is expected to balloon since it imports about 90 per cent of its domestic crude oil needs, thereby denting India’s foreign exchange reserves.
The West Asia crisis is likely to widen India’s current account deficit (CAD) and lead to a weaker balance of payments (BoP).
As per various estimates, India’s CAD, which happens when a country’s total imports of goods and services exceed its total exports and income receipts from abroad, is likely to rise to about 1.3 per cent of GDP from about 0.8 per cent in FY26.BoP is the difference between inflow into and outflow from the country in a particular period of time.
The rupee has hit a record low of 95.63 to a dollar on Tuesday.
Prime Minister Narendra Modi had on Sunday called for judicious use of fuel, postponement of gold purchases and foreign travel, among other measures, to conserve foreign exchange amid the West Asia crisis.
Addressing a rally organised by the Telangana BJP in Hyderabad, he suggested reducing petrol and diesel consumption, using metro rail services in cities, car-pooling, increased use of electric vehicles (EVs), utilising railway services for parcel movement, and working from home to conserve foreign exchange amid the crisis in West Asia.
Speaking at the CII session, Nageswaran said India’s fiscal consolidation path, infrastructure investment, and the reform record of recent years provide the foundation, but the strategic context demands more than sound macro-management.
“It demands a rethinking of how we position ourselves in a structurally altered world,” he said.
Noting that currently, the world is “geopolitically contested and dotted with active conflicts”, Nageswaran said emerging economies that continue to plan on the assumption that the pre-2020 global economic architecture will reassert itself will be making a “strategic error”.
Nageswaran said geo-economic fragmentation, technology bifurcation, the permanent repricing of geo-political risks, and the uneven cost of an industrial policy transition are the structural parameters within which economic policy will be made for the foreseeable future.
“India, given its scale, democratic legitimacy, and the breadth of relationships, is better placed than most to help shape what comes next,” he said, adding that what is also required is the strategic clarity to recognise that it is only a limited time window to reposition trade relationships, technology partnerships, supply chain architecture, and the coalition building that will shape the next international economic order.
Nageswaran noted that four structural shifts are imperative for emerging economies going forward. The first is geoeconomic fragmentation, trade wars, strategic decoupling and an expanding architecture of export controls and sanctions. Supply chains built over decades for efficiency are now being rebuilt for resilience.
The second is technology bifurcation, semiconductor supply chains, digital infrastructure and standards architectures are splitting between competing technological ecosystems.
The third is the energy transition premium, and the fourth structural shift is the permanent repricing of geopolitical risk across every market that matters.
