India’s Finance Ministry does not see any immediate need to increase government borrowing despite ongoing geopolitical tensions and rising commodity prices, according to government sources.
Officials said the Union Budget for 2026-27 was prepared with global uncertainties already in mind. As a result, the government believes its fiscal plans remain on track and there is enough room to manage current challenges without changing the borrowing programme.
GOVERNMENT RELIES ON EXISTING FISCAL STRATEGY
Sources said the government had already built flexibility into its budget calculations to deal with external shocks. Since the start of conflict-related disruptions in global markets, several support measures have been introduced, including credit guarantee schemes, stabilisation fund mechanisms and insurance risk-pooling arrangements.
These measures were aimed at protecting vulnerable sectors and maintaining economic stability during a period of uncertainty.
NON-TAX REVENUE EXPECTATIONS REMAIN STRONG
The Finance Ministry is also counting on stronger non-tax revenues during the current financial year.
Apart from disinvestment, land monetisation and asset monetisation, officials are hopeful of exceeding the budgeted target of Rs 80,000 crore under miscellaneous capital receipts. This could provide an additional cushion to government finances.
CRUDE OIL, GOLD AND FERTILISERS REMAIN KEY CONCERNS
According to officials, crude oil, gold and fertilisers remain the three biggest external vulnerabilities to the Indian economy.
All three require significant foreign exchange outflows and leave the country exposed to swings in global prices.
On gold, the government is currently adopting a wait-and-watch approach. Sources said there are no plans at present to launch a new Sovereign Gold Bond (SGB) scheme, with policymakers closely monitoring developments in international bullion markets before taking any decision.
Among the key areas of concern, fertilisers have emerged as the most sensitive issue.
Government sources said the Department of Fertilisers has sought a 100 per cent increase in subsidy allocation over the Rs 1.77 lakh crore provided in the Union Budget for FY27. The department believes substantially higher support may be needed to meet demand and offset elevated global prices.
The request has added to fiscal concerns because of the large subsidy burden involved.
Officials said that when crude oil prices rose sharply following the outbreak of conflict, the Finance Ministry agreed to support the sector for a period of 78 days.
According to sources, around Rs 1.23 lakh crore was provided to help oil marketing companies absorb part of the impact and keep fuel prices stable during that period.
Sources added that fuel retailers are still incurring losses of around Rs 650 crore per day by selling fuel at rates lower than those implied by prevailing global crude oil prices.
However, beyond the initial 78-day support period, officials said the government did not have the fiscal capacity to continue bearing the burden, while oil marketing companies were also unable to absorb additional losses indefinitely.
As a result, part of the increase in fuel costs had to be passed on to consumers.
Despite the pressures from higher commodity prices and subsidy requirements, the government is not planning to seek supplementary demands for grants during the upcoming Monsoon Session of Parliament.
Instead, officials are expected to review expenditure priorities in October before deciding whether any additional fiscal interventions are required.
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