West Asia Conflict Threatens India's FY27 Fiscal Stability: ICRA Warns

• ICRA warns that the West Asia conflict and surging global crude oil and natural gas prices will complicate India's FY2027 fiscal position.
• Crude prices have more than doubled from pre-crisis levels, increasing input and logistics costs and disrupting supplies, including key fertiliser inputs.
• This could lead to higher government expenditure on fertiliser and LPG subsidies, while negatively impacting corporate tax collections and refining margins.
• The government may use the Economic Stabilisation Fund and front-load subsidy payments to absorb fiscal shocks, but risks remain if energy prices stay high.
• A prolonged conflict could pose significant upside risks to the central government's FY2027 fiscal deficit target of 4.5 per cent of GDP.