India’s external sector is demonstrating strong resilience, with macroeconomic policies successfully easing underlying risks, Chief Economic Advisor V Anantha Nageswaran said on Friday. Speaking at the NDTV Ignite summit, the CEA assured that the Reserve Bank of India will not need to burn through its dollar reserves to manage the rupee’s trajectory, declaring that “the worst is behind us” on the external front.
The macroeconomic situation now appears much more under control, aided by proactive government measures during recent global crises. Notably, crude oil prices have behaved better than anticipated, and a decline in urea prices is providing an additional breather to the domestic economy.
Geopolitical Risks And Growth Outlook
Despite the optimism, Nageswaran cautioned that India is not immune to global geoeconomic friction. If the ongoing conflict in the Middle East sustains into the second half of the year, or if crude oil prices breach the $100 per barrel mark, India’s economic growth could moderate to 6%. However, acknowledging that there are still many “unknowns” in the global landscape, the CEA firmly stood by the Reserve Bank of India’s current 6.6% GDP growth estimate.
Looking at the long-term horizon, Nageswaran emphasised that India needs to consistently compound its growth at 8% to achieve the ‘Viksit Bharat’ goal. He also expressed confidence that the country is positioned to handle the FY27 fiscal year better than expected, adding that nominal GDP expansion will help compensate for any lower tax buoyancy, even as he noted that government tax reliefs remain somewhat unbalanced.
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Navigating The AI Job Market
Addressing the rapid integration of artificial intelligence across corporate infrastructure, the CEA stressed the urgent need to figure out how to create new jobs within the AI ecosystem. He pointed out that the workforce will have to prioritize “AI insulator” skill areas to remain relevant and protected from technology-led disruptions.
On the broader employment and income front, Nageswaran delivered a positive assessment. Household income growth is tracking higher, with salaries generally growing in double digits. He also cautioned that when analyzing India’s labor metrics, it is crucial to separate voluntary from involuntary employment to accurately gauge workforce health.
Corporate Capex And Rural Resilience
Shifting focus to capital markets and corporate health, the CEA observed that listed companies have recently ramped up their investments, signaling a reviving capex cycle. While he noted that India remains an outlier in the global bond market, the same does not hold true for the equities space.
The rural economy also presents a strong narrative. Nageswaran projected that Kharif crops should perform well this year despite the lingering threat of El Nino. He attributed this positive agricultural outlook to higher reservoir levels and a substantially better sowing season.
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