West Asia crisis a ‘live stress test’ for India’s balance of payments, says CEA V Anantha Nageswaran

India’s chief economic adviser V Anantha Nageswaran warned on Tuesday that the ongoing West Asia crisis has turned into a “live balance of payments stress test” for India with direct implications for inflation, the current account and the exchange rate, and highlighted deep structural shifts reshaping the global economic order.

Addressing the CII Annual Business Summit 2026 in New Delhi, Nageswaran said, “The West Asia crisis 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.”

He said Brent crude futures have risen over 48% since the start of the conflict, while “very large containers, freight rates from the Middle East Gulf to China are up 500% year on year, a number that rewards a very slow reading and reflection”. He also noted that urea prices have more than doubled and that dynamic RAM prices are up 572% year-on-year.

“For India, the exposure is structural: 87% of our crude is imported, with 46% transiting through or near the Strait of Hormuz,” he said, adding, “60% of our LPG is imported, and over 90% of that comes via the Gulf.” He also said, “38% of annual remittances, a figure that runs into many tens of billions of dollars, originates in Gulf countries”.

Nageswaran said “managing the current account credibly, financing it, and preventing further currency depreciation, are the central macroeconomic imperatives of FY27,” adding that India’s “fiscal consolidation path, infrastructure investment, and the reform record of recent years provide the foundation”.

‘Age-old assumptions under pressure’

The CEA said the post-1945 global economic order, which accelerated after the 1990s, rested on assumptions that trade would be governed by comparative advantage, capital would flow to its most productive uses, technology would spread through commercial relationships, and multilateral rules-based systems would remain stable.

“Each of these assumptions is now under serious and simultaneous pressure,” he said, adding, “What we are experiencing is not a crisis within the system, it is a structural challenge to the organizing principles of the system itself.”

Describing the changes as “structural shifts”, he identified four major trends: geo-economic fragmentation, technology bifurcation, the energy transition premium, and the permanent re-pricing of geopolitical risk across every market that matters.

On geo-economic fragmentation, Nageswaran said, “Trade wars, strategic decoupling and an expanding architecture of export controls and sanctions are displacing comparative advantage as the organizing logic of global commerce.” He added, “Supply chains built over decades for efficiency are now being rebuilt for resilience.”

On technology, he said, “Semi-conductor supply chains, digital infrastructure and standards architectures are splitting between competing technological ecosystems,” adding, “the choice of technology partner has become inescapably a geopolitical choice”.

On the energy transition, Nageswaran said, “An industrial policy agenda was embedded across several major economies without an honest democratic accounting of its full cost.” He pointed to the IEA 2026 ministerial communique reducing references to net zero “from 15 instances to just one” and noted that Denmark was considering extending North Sea oil and gas drilling to 2050.

“These are not fringe positions. They are the considered responses of governments confronting economic realities that had not been previously honestly shared with their public,” he said.

‘Pre-2020 order may not return’

The CEA also cautioned that emerging economies should not assume that the pre-2020 global economic architecture will return. “Emerging economies that continue to plan on the assumption that the pre-2020 global economic architecture will reassert itself will be making a strategic error,” he said.

Referring to the global strategic environment, Nageswaran said incumbent powers “tend to ensure that the terms of engagement remain calibrated to their interest.” He added, “The assumption that our rise will be enthusiastically facilitated by those whose current advantages it would eventually challenge requires scrutiny rather than comfortable acceptance.”

He said India was responding through a diversification of economic relationships and highlighted that “nine trade agreements and comprehensive economic partnerships in five years represent the most concentrated burst of trade diplomacy in independent India’s history”. He was referring to frameworks with the United Kingdom, European Union, EFTA, US, Oman, New Zealand and Australia.

“The fracturing of the old order is not only a threat to be managed. For an economy with India’s trajectory, democratic legitimacy, and civilizational depth, it is also a genuine opportunity,” he said, adding that the opportunity would depend on “whether we act on that recognition with the seriousness and the speed it demands”.