The Standing Committee on Finance is set to meet soon to discuss the evolving economic situation in the country amid uncertainties due to the West Asia crisis, according to a Zee News report. Committee Chairman Bhartruhari Mahtab noted that despite serious headwinds, India's economy is emerging in a better way with certain positive indicators, including increased household savings compared to the previous year. However, he highlighted a key challenge that private investment is not picking up, even though government investment is increasing to spur economic growth, which requires immediate attention.
India's economy is estimated to have grown at 7.7 per cent in 2025-26 (April-March), with a robust 7.8 per cent growth in the January-March quarter, as reported by PTI. The RBI's monetary policy committee minutes released on Friday show that India has been able to withstand West Asia crisis disruptions due to strong economic fundamentals. MPC member Nagesh Kumar emphasized that the Indian economy entered the crisis with much stronger macroeconomic fundamentals than previous crises, including the global financial crisis and Covid-19, before the conflict started in late February.
Emphasis on fiscal consolidation over recent years has helped bring down the fiscal deficit from 6.5 per cent of GDP in 2022-23 to 4.4 per cent by 2025-26, providing fiscal space to address West Asia crisis challenges. The RBI minutes indicate this fiscal space can be used to support economic growth by sustaining and enhancing public investment to mitigate weaknesses in private consumption due to rising costs and absorb high crude price subsidies. The committee has decided to meet again towards the third week of this month and will prepare a comprehensive report with recommendations to the government.
The RBI's analysis indicates a clear relationship between energy prices and domestic inflation: if crude oil prices are higher by 10 per cent than the baseline, assuming full pass-through to domestic product prices, inflation could increase by around 50 basis points. However, since the RBI meeting, the US and Iran have signed a peace deal, resulting in sharp decline in crude prices to around USD 75 per barrel, which is expected to bring down inflation going forward. The inflation outlook remains vulnerable to prolonged supply-chain disruptions from West Asia conflict and uncertainty over southwest monsoon distribution.
