India’s fiscal policy shifting towards growth resilience amid global risks, says S&P Global report

India’s fiscal policy is undergoing a major transition aimed at supporting domestic growth and strengthening economic resilience as global uncertainties rise due to the ongoing West Asia conflict, according to a report by S&P Global.

The report said India is moving beyond immediate crisis management and adopting medium- to long-term strategies focused on growth protection, energy security, and economic stability.

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“India’s fiscal policy is evolving to support domestic growth,” the report said, highlighting the country’s changing approach from short-term economic support measures to building long-term strategic resilience.

Key findings from S&P Global report

1. Global tensions increase economic pressure

S&P Global said India was already monitoring risks linked to rupee depreciation, foreign portfolio outflows, and global economic fragmentation.

The West Asia conflict has further increased concerns due to higher energy prices, supply disruptions, and currency volatility.

The report noted that economic indicators have started reflecting these pressures, with the HSBC India Composite Purchasing Managers’ Index (PMI) for March 2026 falling to 57.0 from 58.9 in February, marking its weakest level since November 2022.

“The sustained nature of the Middle East war is changing Indian risk management from providing immediate buffers to reorienting medium- to long-term strategies,” the report stated.

2. Government expands economic protection measures

The report highlighted several steps taken by the government to reduce the impact of external shocks, including:

• Rationalising cooking gas allocations
• Resuming purchases of Russian crude oil
• Expanding fuel and fertiliser subsidies
• Reducing excise duties on petrol and diesel
• Establishing an Economic Stabilization Fund as a financial buffer

3. Fiscal consolidation faces fresh challenges

S&P Global noted that India had reduced its fiscal deficit from 9.2 per cent of GDP in fiscal year 2021-22 to 4.4 per cent in fiscal year 2025-26.

However, new spending commitments aimed at protecting the economy from rising energy and food costs could slow the pace of fiscal consolidation.

A supplementary budget of Rs 2.8 trillion announced in March 2026 focused on energy and food subsidies, while another Rs 1.2 trillion package in April included a Rs 1 trillion Economic Stabilisation Fund for oil hedging purposes.

“This countercyclical shift risks temporarily breaching the fiscal consolidation path,” the report cautioned.

4. Debt levels may rise temporarily

The report estimated that India’s central government debt-to-GDP ratio could increase to 57.5 per cent from 56.1 per cent in fiscal year 2025-26.

This could delay the target of bringing the ratio down to 49-51 per cent by fiscal year 2030-31.

5. Focus on resilience and strategic autonomy

Despite challenges, S&P Global said India’s policy response reflects a broader focus on resilience and strategic autonomy.

The report highlighted that fiscal measures, industrial policy changes and energy diversification efforts are being pursued together to protect growth and reduce vulnerabilities.

It said India’s evolving fiscal approach reflects an attempt to balance economic expansion with long-term stability during a period of heightened geopolitical and economic risks.