FM warns about “systemic tremor” to energy markets, hails India's fiscal health
Nirmala Sitharaman highlights the move away from episodic shocks and towards a state of “permanent volatility”
By Samreen Wani
Last Updated: Apr 07, 2026, 10:22 IST2 min
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In a Nutshell
FM Nirmala Sitharaman warns that Middle East conflict poses a “systemic tremor” to global energy markets, but highlights India’s strong fiscal health, low debt ratios, and resilience amid global volatility, contrasting with advanced economies facing debt crises.
Minister of Finance Nirmala Sitharaman on Monday said the world has moved from an era of episodic “shocks” to one of “permanent volatility”, warning that the escalating West Asian conflict now acts as a “systemic tremor” threatening global energy flows. Delivering the keynote address at the National Institute of Public Finance and Policy (NIPFP) in New Delhi, she said 2026 had already proven more “challenging” than the year before. “The escalation of the Middle East conflict 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,” she said.
The debt situation
Invoking the VUCA framework—volatility, uncertainty, complexity, and ambiguity—Sitharaman said a term coined to describe the post-Cold War world had found its “truest and most unsettling relevance” in the present decade. She warned that decades of reckless global spending are finally causing a financial crisis for advanced economies. Global public debt has surged to about $106 trillion, exceeding 95 percent of global GDP. The US carries a debt-to-GDP ratio of 125 percent, while Japan’s stands at 235 percent.
Many advanced economies that spent decades running expansionary fiscal policies now find themselves with severely constrained policy space, exactly at the moment they need it the most. They face, she said, “a grim choice between austerity and instability.”
Against this turbulent global backdrop, Sitharaman made the case for India’s economic exceptionalism, pointing to a set of fiscal indicators she described as the product of “deliberate, sustained, and sometimes politically difficult choices”. “On the contrary, India has fiscal space, room to maintain our capex programme, room for the RBI to cut rates, room to offer targeted support to affected sectors. This is the dividend of a decade of fiscal discipline,” she said.
India’s general government debt-to-GDP ratio stands at about 81 percent, the lowest among major economies after Germany, and the IMF projects it will fall further to 75.8 percent by 2030, even as debt trajectories for the US, China, and other advanced economies are expected to worsen. She also highlighted India’s external debt-to-GDP ratio of 19.1 percent (as of September) and foreign exchange reserves of over $688 billion as of March 31, 2026, providing roughly 11 months of import cover.
A decade ago, India was counted among the so-called “Fragile Five”—economies most vulnerable to external shocks, she said. But today, India is counted as the fastest-growing major economy in the world. The fiscal deficit has been brought down to 4.4 percent of GDP, with the government now targeting a debt-to-GDP ratio of 50 percent by 2030-31. Good public finance, she said, strengthens the counter-cyclical muscle of the state. “A good public finance policy improves the counter-cyclical capacity of fiscal policy, especially the ability to “lean against the wind” in economic downturn,” she added.
First Published: Apr 07, 2026, 11:04
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