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CEA says West Asia turmoil effectively live stress test for India's balance of payments
May-13-2026

Chief Economic Advisor (CEA) V Anantha Nageswaran has said the current West Asia crisis is effectively a live stress test for India's balance of payments, with direct consequences for inflation, the current account, and the exchange rate. Nevertheless, India's fiscal consolidation path, infrastructure investment, and reforms provide it a base to navigate the current environment of conflict. 

Nageswaran said that India imports 87% of its crude oil, of which 46% is transiting through or near the Strait of Hormuz, where the seven-day moving average of tanker traffic has dropped to just five vessels. 60% of our LPG is imported, over 90% via the Gulf. 38%of annual remittances originate in Gulf countries. He stated ‘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’.

The Strait of Hormuz has been effectively closed for the past two months following the US and Israel attacked Iran, pushing global crude prices higher by over 60%. India's import bill is expected to balloon since it imports about 90% of its domestic crude oil needs, thereby denting India's foreign exchange reserves. The West Asia crisis is expected to expand India’s current account deficit (CAD) and lead to a weaker balance of payments (BoP).


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