Energy subsidies have undermined fiscal discipline, and the Iran war has forced India to make concessions on its deficit targets. If global fertilizer prices continue to fall, it might give the Modi government some relief—but geopolitical risks are never dictated by the ledger.

Indian officials say that due to the Iran war, energy subsidy costs have risen, and this year's budget deficit will increase to 4.8% of GDP, higher than the 4.3% target set in February. The deterioration stems from the global environment rather than a shift in fiscal discipline. The last time the target was missed was during the pandemic, with a deficit reaching 9.2% of GDP in the 2020-21 fiscal year. The government plans to reassess fiscal prospects within the year and push for cross-ministry expenditure cuts, with fertilizer prices being a key factor. The decline in global fertilizer prices helps reduce subsidy spending.