The main financial burden imposed by the crisis in West Asia on the government is higher prices of fertilizers. According to a request made by the Ministry of Chemicals and Fertilizers, the Ministry of Finance has been asked for a hundred percent increase in fertilizer subsidies from the current level of subsidy budgeted at ₹1.77 lakh crore.

Farmers are exempted from bearing any additional fertilizer prices; hence the need to subsidize. Moreover, crude oil prices have risen following the onset of the Iran-US war on February 28. However, during the initial 78 days of the price hike, no action was taken by the government to transfer the increase to consumers since excise duties of ₹1.23 lakh crore were kept by oil marketing companies (OMCs).

According to sources in the Ministry, it will be impossible for the government to further cushion OMCs in an attempt to protect consumers from higher costs of petrol and diesel products. The Petroleum Ministry claims that OMCs have lost between ₹500-600 crore per day due to high crude oil prices.

Gold imports, along with fertilizers and crude oil, have also increased pressure. To discourage gold imports, the government has increased import duties. Ministry sources say that people in India have a special affinity for gold, so the government can only take measures to curb imports to a limited extent.

Highly placed sources in the Finance Ministry say that despite all the pressures, the domestic economy is in a strong position and the growth rate in the first two months of the first quarter (April-May) of the current financial year 2026-27 is similar to the last quarter (January-March) of the previous financial year 2025-26.

The growth rate in the last quarter was recorded at 7.8 percent. Highly placed sources say that the data released for economic indicators such as auto sales, power generation, exports, and manufacturing in April and May appear quite strong.

According to high-ranking sources, pressure on fertilizers is increasing because the West Asian crisis has pushed the price of fertilizers, which used to be ₹2,900 per bag (45 kg), to ₹4,500 per bag.

Before the war, 10-15 companies supplied fertilizers to the global market, but now many of them have withdrawn. According to Finance Ministry sources, every effort is being made to increase domestic fertilizer production to reduce imports.

According to Finance Ministry sources, despite the economic challenges, the government is not planning to cut its capital expenditure. The Finance Ministry expects to achieve its disinvestment target of more than ₹80,000 crore in the current financial year.

Sources say that existing external challenges were taken into account when presenting the budget for the current fiscal year. Secondly, an Economic Stabilization Fund of Rs 1 lakh crore has been created to address the economic challenges arising from the Iran war. According to Finance Ministry sources, there has been no decrease in remittances from Indians living abroad.