New Delhi, April 6 – Finance Minister Nirmala Sitharaman stated on Monday that fiscal prudence has given the government the flexibility to maintain capital expenditure (capex) and support sectors affected by the crisis in West Asia.
Furthermore, she said that the Reserve Bank can consider further interest rate cuts to address the situation.
Highlighting the importance of sound public finance policies in challenging times, the Finance Minister emphasized that it enhances counter-cyclical capacity, particularly the ability to "weather economic downturns."
She noted that many countries with high debt and deficits face a difficult choice between austerity and instability.
On the contrary, she said, "India has fiscal space—the ability to maintain its capex program, the ability for the RBI to cut interest rates, and the ability to provide targeted support to affected sectors. This is the result of a decade of fiscal discipline. This is the strategic value of fiscal prudence that has yielded benefits over decades."
Therefore, she said that India has reduced excise duty on diesel and petrol, and specific exemptions have been granted on critical petrochemical products and Special Economic Zones (SEZs) to operate within the Domestic Tariff Area.
The government had slashed excise duty on petrol and diesel by Rs 10 per litre on March 26 to shield consumers from rising global crude prices amid the ongoing conflict.
Global crude prices have risen by almost 50% since the United States and Israel launched military strikes against Iran on February 28, triggering a strong response from Tehran.
The government also imposed an export duty of Rs 21.50 per litre on diesel and Rs 29.50 per litre on aviation turbine fuel (ATF). Excise duty on petrol has been reduced to Rs 3 per litre, while it is currently zero for diesel.
On April 2, India exempted import of critical petrochemical products from customs duty to ensure supply stability and provide relief to consumers of final products amid disruptions in shipping routes due to the West Asia conflict.
Besides crude, India is a major importer of fertilizers and natural gas.
Observing that the current year is even more challenging than the previous one, Sitharaman said, "The escalation of the Middle East conflict has evolved from a regional security concern into a systemic tremor threatening the vital arteries of global energy, and hardening the lines of a new, multipolar world order."
Recalling various global events that occurred in 2025, she said the year was monumental in more ways than policymakers initially thought.
"Trade fragmentation has introduced severe uncertainty into global supply chains. This led to sharp downward revisions in global growth forecasts, but the year ended more optimistically than previously perceived, particularly for India," she said.
Talking about India's debt-to-GDP ratio, the Finance Minister said that the country stands out as the general government debt-to-GDP ratio (which includes state debt), at approximately 81%, is the lowest among major economies after Germany.
More importantly, India is the only major economy where the IMF projects this ratio to fall significantly — to 75.8% by 2030 — while the debt outlook for advanced economies such as the US, China, Germany, and others is projected to worsen, she said.
"Our external debt-to-GDP ratio stands at just 19.1% (as of September 2025) — one of the lowest in the emerging market world. India's foreign exchange reserves, at over USD 688 billion (as of March 31, 2026), provide import cover of approximately 11 months — a substantial buffer," she said.
This is not an involuntary outcome, as many leaders wrongly believe, she said, adding that it is the result of deliberate, sustained, and sometimes politically difficult choices made over years of fiscal management.
It was made possible because of the agile policies and stable leadership of this government, with a singular focus on ensuring India achieves rapid progress, she added.
Stressing that India has undergone a massive structural transformation of public finance over the past decade, she said, "We have credibly changed the course of fiscal policy from consumption-led deficits (under the UPA) to productive investment-led consolidation under the leadership of Prime Minister Narendra Modi."
Prudent fiscal policy is not just about 'austerity' or cutting back expenditure, she said, it is also about spending resources in an efficient and transparent manner.
This prudent management has strengthened India’s macroeconomic stability, resulting in credit rating upgrades from agencies such as Morningstar DBRS, S&P, and R&I in 2025, she added.
Recalling India's "Fragile Five" economy tag over a decade ago, she said, India is now the fastest-growing major economy in the world.
"We began with a fiscal deficit on an unsustainable trajectory. We have brought it to 4.4% of GDP, en route to 50% debt-to-GDP by 2030-31. We began with a tax system built on suspicion. We have created one premised on trust," she said.
The road to Viksit Bharat 2047 is long, and the challenges ahead—climate finance, subnational fiscal reform, debt management, the fiscal implications of demographic change, the public investment return challenge, technology-led disruptions—are formidable, she added.