India is preparing to let its fiscal deficit balloon to as much as 4.8% of GDP for the current fiscal year, up from a target of 4.3% set when the budget began on April 1. That 50-basis-point widening doesn’t sound like much until you remember we’re talking about one of the world’s largest economies quietly admitting it can’t stick to its own spending plan.
This would mark the first time India has missed its fiscal deficit target since the pandemic. The culprit isn’t another global health crisis, though. It’s oil.
The Iran problem and India’s energy bill
India is the world’s third-largest oil consumer. Roughly 90% of the country’s oil imports come from Iran, which means the ongoing conflict there isn’t just a geopolitical headline for New Delhi. It’s a line item on the national balance sheet.
The Iran conflict has sent energy subsidy costs climbing, forcing the Indian government to absorb higher fuel prices rather than pass them directly to consumers.
