West Asia war has evolved into 'systemic tremor': FM Nirmala Sitharaman

FM Nirmala Sitharaman says current year even 'more challenging' but India has enough fiscal space

The ongoing conflict in West Asia has evolved from a regional security concern into a “systemic tremor”, threatening the vital arteries of global energy and hardening the lines of a new, multipolar world order, said Union Finance Minister Nirmala Sitharaman on Monday.

 

“This current year is even more challenging as we move from a landscape of ‘shocks’ to one of ‘permanent volatility’,” she said, while speaking at the golden jubilee function of the National Institute of Public Finance and Policy.

 

The finance minister pointed to the post-Cold War acronym VUCA, now newly resonant. “It is what it is: A world of Volatility, Uncertainty, Complexity, and Ambiguity, all at once.”

 

 

Responding to a question from Sabyasachi Kar, director of the Institute of Economic Growth, on budgeting in an era of perpetual shocks, Sitharaman said the government had created adequate fertiliser stocks for the Kharif season. But, she added, while tendering for the Rabi crop should begin now, the challenge lay in pricing: “At what price”. 

 

“It is not the quantity which is worrying me, because there’s also a lot of excess buying. People are hoarding. The supplier is unclear, even if you found one. Many of the insurance companies have now refused to insure those shipping lines which come through some parts,” she said, citing the diversion of an India-bound Iranian crude oil ship to China. “The gas-carrying huge tankers like ships are destined to one port of call, but they are diverted at the last minute. These are not things which you anticipate.”

 

Budget-making, she said, can no longer be confined to the third and fourth quarters, but must respond continuously to shifting conditions, looking at what’s happening today.

 

On public finance and debt management, Sitharaman argued that prudence is not simply austerity but the efficient, transparent use of resources. In an era of trade fragmentation and strained supply chains, fiscal discipline assumes greater importance than previously understood.

 

At a time when many economies face high levels of debt and deficits, she said: “India has fiscal space — room to maintain our capex programme, room for the RBI (Reserve Bank of India) to cut rates and room to offer targeted support to affected sectors. This is the dividend of a decade of fiscal prudence and discipline.”

 

She also underlined the effort required to broaden the tax base, noting that TDS (tax deducted at source) functions as a tracking mechanism. “I'm not really waiting for the revenue which comes out of TDS. I’m waiting for them to say, look, I paid a TDS, but here’s my tax assessment…I'm more looking at it giving relief for people who are repeatedly in the low end of the tax paying structure.”

 

Sitharaman asked states to raise revenues in ways that are fair, growth-compatible, macroeconomically sound and enforceable. She said they should view the Niti Aayog’s Fiscal Health Index not as an external imposition, but as a mirror -- a transparent, evidence-based reflection of fiscal health.

 

Highlighting the Centre’s just-in-time release of funds, she said the timing of public expenditure is itself a macroeconomic instrument.

 

“Under Prime Minister (Narendra) Modi, we have credibly changed the course of the fiscal policy from consumption-led deficits, which was marked during the era before 2014 to productive investment-led consolidation. It’s a distinct change in the character of how public finance is managed,” she added.