Nirmala Sitharaman flags ‘3F’ concerns: Fuel, fertiliser, foreign exchange

Earlier this month, the Prime Minister urged the public to change their consumption behaviour by reviving Covid-era measures such as work-from-home and virtual meetings, avoiding non-essential foreign travel and gold purchases for a year, and prioritising local goods, among others. These actions would help save the country’s foreign exchange reserves as most of these activities and purchases require import.

Since then, the government has announced a host of measures to stem the rupee’s fall. Plagued by continued foreign fund outflows from the domestic financial markets – Foreign Portfolio Investors have dumped Indian bonds and stocks worth $24.4 billion since the war began in late February – and weak net Foreign Direct Investment inflows, the rupee has slumped by nearly 5% since February 27 and nearly breached the 97-per-dollar mark last week. However, it has gained some ground since then, and closed at 95.23-per-dollar on Monday, with the Reserve Bank of India said to have intervened heavily to stop the rupee from falling further. This has taken a heavy toll on the RBI’s forex reserves. As on May 15, the reserves were down around $40 billion compared to pre-war levels. Further, the RBI’s gross forex sales of $29.6 billion in March was the highest in 13 months and occurred even as net FDI during the month was in positive territory for the second month running.

Meanwhile, some of the measures taken by the government to save forex include a sharp hike in the import duty on gold, silver, and platinum; restrictions on duty-free gold imports under a key export scheme; and four price hikes for petrol and diesel sold at retail pumps.

With the rupee repeatedly plummeting to all-time lows, economists have warned that India faces a Balance of Payments deficit for the third straight year in 2026-27. With inflation likely to increase in the coming months due to the energy shock and growth predicted to take a hit, experts have warned that India faces a crisis.

However, on Monday, Sitharaman took on the critics and said India remains a robust economy, adding that “naysayers” who say that “’it’s all falling down, it’s crumbling’” were those who want to “decry the achievements of our own people”.

“And therefore, for all the good that is being done by the common people themselves, that is forgotten and a pessimistic, cynical narrative is generated, which is just not right. It’s not right is one thing, but it is wrong because it is fear-mongering. India cannot afford fear-mongering. We need to give confidence to the people with our words and with our actions, and that’s what you’re seeing at various levels,” the Finance Minister said.

The RBI’s latest forecast, made in early April, pegs India’s GDP growth in 2026-27 at 6.9%. However, economists have been warning over the last month or so that growth this year could be closer to 6-6.5%. The central bank’s Monetary Policy Committee, which will meet on June 3-5, cut the policy repo rate by 125 basis points to 5.25% in 2025 and has not made any changes to it so far in 2026. But some economists are increasingly seeing the possibility of an interest rate hike as early as next month due to the upside risks to inflation from the elevated global crude oil prices and the rapidly weakening rupee.