Fuel Shock, Fertiliser Surge: Why the Government Still Sees India’s Economy on Track

By Mahima Katal

New Delhi, June 9: Rising crude oil prices and increasing fertiliser costs driven by the ongoing West Asia crisis are emerging as fresh challenges for the Indian economy. Yet, the Centre remains confident that the country's growth trajectory is intact, citing resilient domestic demand, strong tax collections and improving private investment.

Government sources on Tuesday said that despite mounting global uncertainties, there is no immediate need for additional borrowing or supplementary grants. The fiscal deficit target of 4.3 per cent of GDP for FY27 remains achievable, they said.

The government had factored global risks, including trade disruptions and geopolitical tensions, into its FY27 Budget calculations. While the West Asia conflict has pushed up fuel and fertiliser import bills, officials believe India's domestic economic fundamentals remain strong enough to absorb these shocks.

According to sources, growth momentum seen in the final quarter of FY26 has continued into the first quarter of FY27. Consumption remains steady, GST collections continue to show strength and high-frequency economic indicators point towards sustained economic activity.

Private investment is also showing encouraging signs. Recent industry data indicate an improvement in capital expenditure plans, suggesting growing business confidence despite an uncertain global environment.

To maintain fiscal discipline, the government is relying on non-tax revenue streams, particularly disinvestment and asset monetisation. Officials expressed confidence that the budgeted Rs 80,000 crore target from these initiatives could be exceeded. The proposed disinvestment of IDBI Bank is also expected to progress during the fiscal year.

The government plans to review the broader macroeconomic situation in July after assessing first-quarter growth figures and evaluating the impact of El Niño conditions on the monsoon.

Meanwhile, rising global fertiliser prices are beginning to strain subsidy calculations. Sources said the Ministry of Fertilisers has sought a substantial increase in subsidy support for the current fiscal year. The Union Budget has already earmarked Rs 1.77 lakh crore for fertiliser subsidies.

On the energy front, the government has extended support worth Rs 1.23 lakh crore to oil marketing companies (OMCs) to help keep retail fuel prices stable for 78 days following the escalation of tensions in West Asia. Although OMCs have started raising fuel prices gradually, they continue to absorb significant losses, estimated at around Rs 650 crore per day, due to the gap between domestic retail rates and global crude prices.

Despite these pressures, the government remains optimistic. Officials said reforms aimed at attracting greater foreign direct investment (FDI) will continue, while there are currently no plans to restrict capital outflows.

For now, New Delhi's message is clear: external shocks may be increasing the cost of managing the economy, but they have not yet derailed India's growth story.