'Neither A 1991 Moment, Nor A 2013 One': CEA Anantha Nageswaran On How India Weathered Gulf War

Last Updated:June 29, 2026, 14:27 IST

CEA V Anantha Nageswaran says calibrated government measures, diversified energy sourcing and timely interventions helped India withstand the Gulf conflict's economic shock.

India successfully weathered the economic fallout of the recent Gulf conflict that temporarily disrupted shipping through the Strait of Hormuz, avoiding a potential fuel crisis and macroeconomic instability through a combination of calibrated policy measures and favourable global developments, Chief Economic Advisor (CEA) V Anantha Nageswaran has opined.

According to a piece with Business Standard, Nageswaran reflected on the country’s response to the conflict and wrote that despite fears of an oil shock, supply disruptions and a balance-of-payments crisis, India managed to maintain uninterrupted fuel supplies, stable domestic prices and overall macroeconomic stability.

“When strikes closed the Strait of Hormuz at the end of February, the script for India seemed already written," he wrote, noting that the country imports nearly 90 per cent of its crude oil and over half of its cooking gas through the Gulf.

However, “nearly four months on, not a single retail outlet ran dry. Every household that wanted a cylinder got one. India faced neither a 1991 moment nor a 2013 one."

He added that the outcome “was not an accident, and it was not luck alone," describing the government’s response as deliberate, gradual and similar in approach to its handling of the Covid-19 pandemic.

HOUSEHOLDS GIVEN TOP PRIORITY

According to the CEA, the government’s priority during the crisis was to shield households from supply shortages and price shocks.

Although the import-linked cost of a standard LPG cylinder crossed Rs 1,600, the retail price for consumers was kept close to Rs 900, with even lower prices for poorer households.

Commercial and bulk users were asked to reduce consumption to ensure uninterrupted household supplies.

“The memory of the early pandemic months, when panic among migrant workers set off a wave of reverse migration to the villages, was instructive," he wrote, explaining the rationale behind prioritising domestic consumers.

SUPPLY CHAINS DIVERSIFIED, DOMESTIC OUTPUT RAMPED UP

Beyond price support, India strengthened energy security by rapidly increasing domestic cooking gas production and diversifying import sources.

Nageswaran said domestic refiners increased LPG production by nearly 50 per cent within a week, significantly replacing lost imports.

At the same time, India expanded purchases from the United States and Russia, brought in additional suppliers and secured the necessary waivers to continue importing Russian crude.

The government also accelerated longer-term initiatives, including expanding piped natural gas connections, promoting coal gasification, increasing ethanol blending and enhancing strategic crude oil storage following the Prime Minister’s visit to the United Arab Emirates.

India, he noted, was among the few countries that managed to keep cargo movements uninterrupted even as shipping through the Strait of Hormuz fell sharply.

GOVERNMENT ABSORBED COSTS TO PROTECT CONSUMERS

To cushion the broader economy from rising fuel costs, the Centre chose to absorb much of the financial burden instead of passing it on to consumers, the CEA said.

The government reduced excise duty on petrol and diesel by Rs 10 per litre, resulting in an estimated revenue sacrifice of about Rs 1.7 trillion.

It also eased taxes on aviation turbine fuel while public sector oil marketing companies held retail fuel prices steady for over two months before implementing only a limited increase.

“The logic is worth stating plainly: in such uncertainty, only the government has the balance sheet and the time horizon to bear the risk," Nageswaran wrote, adding that the government deliberately absorbed the fiscal impact rather than shifting the burden onto households and businesses.

Support measures were also extended to airlines and micro, small and medium enterprises through targeted assistance and credit guarantee schemes modelled on the Covid-era response.

The opinion piece highlighted several financial measures aimed at protecting India’s external sector during the crisis.

The government removed withholding tax and capital gains tax on foreign institutional investments in government securities while expanding the scope of the Fully Accessible Route to attract overseas investment into the domestic bond market.

A new non-resident dollar deposit scheme is also expected to strengthen foreign exchange inflows, while India’s existing free trade agreements support export growth.

According to Nageswaran, non-oil and non-gems-and-jewellery merchandise exports, along with services exports, grew by over 12 per cent during April and May 2026 compared to the same period last year.

He also pointed to strong investment indicators, noting that gross foreign direct investment reached $95 billion in the previous financial year, exceeding the post-pandemic range of $70-80 billion.

Meanwhile, India’s current account deficit stood at just 0.6 per cent of GDP in FY26 and is expected to rise only marginally in FY27.

‘FORTUNE LENT A HAND’

While crediting government policy, Nageswaran acknowledged that favourable international developments also played an important role.

He noted that although crude oil prices initially surged beyond $120 per barrel after the Strait’s closure, they later eased below $100 as China’s oil demand weakened and the United States continued releasing oil from strategic reserves.

China’s resumption of fertiliser exports also reduced pressure on India’s fiscal position.

“Honesty also requires acknowledging that fortune lent a hand," he wrote, adding that had oil prices remained elevated, or the conflict continued longer, the economic outlook would have been significantly more challenging.

“Indeed, fortune eventually favours sound policymakers," he remarked.

The CEA also cited Goldman Sachs’ recent decision to raise India’s growth forecast to 6.8 per cent for calendar year 2026 and 6.5 per cent for FY27, both 30 basis points higher than its earlier estimates.

LONG-TERM CHALLENGES REMAIN

Despite the successful management of the immediate crisis, Nageswaran cautioned against complacency, arguing that geopolitical fragmentation and increasingly uncertain global supply chains could continue to put pressure on India’s balance of payments.

He stressed the importance of attracting greater foreign direct investment through a balanced bilateral investment treaty framework, greater tax certainty, contract enforcement by states, reliable logistics and genuinely effective single-window clearance mechanisms.

The CEA also argued that India must reduce its dependence on imports beyond the energy sector.

Pointing out that India’s merchandise trade deficit remains significant even after excluding oil and gold imports, he said the country must expand domestic manufacturing where it is globally competitive while making full use of trade agreements, particularly the new pacts with the United Kingdom and the European Union, to boost labour-intensive exports.

He also called for an accelerated push to equip young Indians with trade-related skills.

Looking ahead, Nageswaran said India now faces a different set of economic challenges, including an underperforming southwest monsoon and the growing impact of artificial intelligence on jobs and society.

“The Gulf conflict tested one kind of resilience; the years ahead will test others," he wrote.

“India met the first test in good order. That is a reason for quiet confidence, and for getting on with the next," he mentioned.

About the Author

Vani Mehrotra

Vani Mehrotra is the Deputy News Editor at News18.com. She has more than 10 years of experience in national and international news and has previously worked on multiple desks.

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