New Delhi, April 23 -- The West Asia war is likely to have a limited impact on India's economy and although inflation could accelerate from the level in March, it will stay within the central bank's tolerance range, S. Mahendra Dev, chairman of the Economic Advisory Council to the Prime Minister (EAC-PM), said in an interview. The economy is likely to expand 7% this year, and the Iran war has re-emphasized the need for faster diversification of energy sources, Dev said. Atmanirbharta or self-reliance is at the centre of India's strategy to navigate a global environment riddled with economic choke points, Dev said. Dev said the economy's resilience in the face of headwinds generated by the West Asia war could be demonstrated by the narrowing of India's trade deficit to $20.67 billion in March. "This shows that the impact of the war is being mitigated by a good export performance to a diversified set of markets. Oil prices remain elevated but are off their March highs. Growth is likely to remain around 7%. However, this would also depend upon how long the conflict lasts," Dev said. "The inflation environment was benign domestically and this provides some buffer to absorb rising costs of energy, especially oil." Dev's outlook of 7% real GDP growth compares with the Reserve Bank of India's (RBI) projection of 6.9% on 8 April and the International Monetary Fund's 6.5% forecast earlier this month. The Economic Survey presented in January projected a 6.8-7.2% growth for FY27. "India's exposure to geopolitical shocks is relatively contained as economic growth is anchored primarily in domestic consumption and investment rather than external demand. This resilience is further reinforced by proactive policy interventions. The establishment of an Economic Stabilisation Fund with an initial corpus of Rs.57,381 crore provides an additional buffer against external volatility," Dev said. Efforts to diversify energy import sources, expand petroleum reserves and secure long-term fuel supply agreements have reduced vulnerability to supply-side disruptions, Dev said. Comfortable fertilizer stock levels, supported by long-term sourcing arrangements, continue to underpin farm production stability and food security, he said. In March, inflation stood at 3.4% but the impact of higher oil prices may increase it to 4-4.5%, which would still be within the RBI's tolerance range of 2% to 6%, Dev added. "The RBI's response is likely to be calibrated, given that this is a supply shock and this is what we saw during the April monetary policy. In terms of long-run rates, the yield on the 10-year bond rose above 7% in early April. However, it has declined to 6.87% since then. This indicates that long-term expectations of inflation by investors have adjusted up in a contained way," he explained. On April 8, the RBI left its 5.25% repo rate unchanged while retaining the neutral monetary policy stance. Dev said sustained high growth is achievable through economic reforms, strong domestic demand, demographic advantages and improvements in infrastructure, manufacturing and services. "In the last decade, we have seen significant reforms such as GST, Insolvency and Bankruptcy Code, ease of doing business and tax reforms. At the same time, macroeconomic stability has been achieved through fiscal prudence and increase in capital expenditure. With regard to agriculture, the states have a major role to play. Thus, India's growth is likely to be more balanced in the long run," said Dev. Dealing with the energy shock from the West Asia crisis is a top priority. India has committed to the vision of net zero emissions by 2070, and the recent events have "re-emphasized the importance of a diversified basket of sources of energy supply," Dev said. The Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Act, 2025, provides for participation of private companies in the sector, he said. The prototype fast breeder reactor recently achieved criticality, an important milestone towards achieving long-term energy security, Dev added, while referring to the Centre's policy initiatives to reduce dependence on oil, especially in the transport sector, with the use of biofuels, compressed biogas, sustainable aviation fuel and electric mobility push. Asked about how India should deal with trade, financial systems, technology, critical minerals and energy becoming economic choke points, Dev said, "The vision of Atmanirbhar Bharat is essential precisely for this reason." Initiatives such as the National Critical Minerals Mission assume importance, Dev said....