NEW DELHI, July 29 (Reuters) - Sustained high crude oil prices could pressure India's fiscal deficit and current account balance again, a finance ministry report said on Wednesday.
The July economic review said geopolitical tensions in the Gulf continued to pose risks through higher commodity prices, disruptions to trade flows and volatile capital movements.
The caution comes after the outbreak of conflict in the Middle East drove up oil prices, lifting India's import bill and pressuring inflation and external balances.
It also flagged a potential El Niño transition as a risk, warning that adverse weather could hurt farm output, stoke food inflation and dampen rural demand.
While foodgrain stocks, reservoir levels and government contingency measures provide some protection, the report said weather and energy-related developments would need close monitoring.
The review said initiatives spanning semiconductors, critical minerals, shipbuilding, coal gasification and other strategic sectors are expected to strengthen domestic manufacturing capabilities and improve supply-chain resilience, helping India's medium-term growth prospects.
Reporting by Sarita Chaganti Singh; Editing by Nivedita Bhattacharjee
Source: Reuters