West Asia war may hit India even if conflict ends soon: EAC-PM chief

S Mahendra Dev, chairman of the Economic Advisory Council to the Prime Minister (EAC-PM), stated that the West Asia war would continue to impact India’s economy, supply chains, and oil markets even if the conflict concludes soon. Speaking at the Golden Jubilee conference series of the National Institute of Public Finance and Policy (NIPFP), Dev emphasized that oil production and supply chains would take time to stabilize, preventing crude prices from returning to $69 per barrel in the near term. India’s macroeconomic position remains strong enough to absorb short-term shocks, but Dev cautioned that crude prices could significantly influence growth and inflation in FY27. He noted that growth might stay within the 6.5% to 7% range if crude prices remain around $95 per barrel, but higher prices—such as $120 per barrel—would require a reassessment of economic forecasts. To mitigate risks, Dev called for a structured risk management framework, including strategic reserves for energy, food, and fertilizers, despite potential short-term costs. He also stressed the need for diversification and faster adoption of renewables, highlighting that India has already met two-thirds of its renewable energy commitments four years ahead of schedule. On trade, Dev supported the government’s efforts to protect export sectors, accelerate free trade agreements, and diversify markets. He expressed cautious optimism about the potential benefits of the India-US bilateral trade framework for Indian exporters, particularly micro, small, and medium enterprises (MSMEs). Dev acknowledged improvements in India’s crisis response mechanisms, citing the Rs 1 trillion stabilisation fund and the Emergency Credit Line Guarantee Scheme (ECLGS) for MSMEs. He concluded that while India’s resilience relies on political stability, macroeconomic strength, and its large domestic economy, sustained growth requires higher investment, stronger state-level governance, and faster implementation of policies.