India enters this challenging phase from a position of relative strength, Nageswaran says
Chief Economic Advisor V Anantha Nageswaran (right) in an interaction with businessline Editor Raghuvir Srinivasan
The ongoing tensions in West Asia present significant macroeconomic risks in FY27 as the conflict emerges as a short-term challenge to India’s long-term goals, Chief Economic Advisor V Anantha Nageswaran said on Wednesday.
Framing the choice as one between Sreya (delayed gratification) and Preya (instant gratification), he emphasised that India’s growth strategy must focus on medium- to long-term investments even as macroeconomic risks rise in the near term.
With nearly 87 per cent dependence on imported crude and significant reliance on the Gulf for remittances, the impact is both immediate and structural; rising crude prices and disrupted supply chains are already weighing on the economy, the CEA said.
He was speaking at an event organised by MCCI.
Long-term capacity building
India enters this challenging phase from a position of relative strength, having maintained over 7 per cent growth, but the path ahead will require faster decision-making, sharper execution and a clear shift toward long-term capacity building.
The crisis could serve as a “silver lining” by forcing India to diversify sourcing, invest in resilience and accelerate reforms, including in agriculture.
Nageswaran stressed that India’s growth ambitions hinge on accelerating its manufacturing transformation in a world where globalisation is fragmenting. “Cost efficiency alone can no longer drive manufacturing decisions. Resilience, diversification and strategic autonomy are equally important,” he said.
He outlined a dual-track manufacturing strategy with labour-intensive sectors such as textiles, footwear, leather, food processing and gems and jewellery to generate large-scale employment and advanced manufacturing in areas like semiconductors, batteries, defence electronics, aerospace and specialty chemicals to build long-term competitiveness.
However, execution at the State level — particularly in land, labour and logistics — remains critical for success, he said.
Manufacturing challenges
A major bottleneck to manufacturing expansion is the shortage of skilled labour. India cannot achieve its target of raising manufacturing to 25 per cent of GDP without strengthening trade skills such as electrical work, machining and construction. “Thereis an urgent need to make vocational skills aspirational,” he said, calling for industry-led apprenticeship programmes and modernisation of training institutions.
He also flagged low private sector investment in research and development as a concern, noting that higher industry participation is essential for global competitiveness.
Despite strong corporate balance sheets and improved profitability, private sector investment remains subdued, with government capital expenditure driving the investment cycle.
Later in a conversation with businessline Editor Raghuvir Srinivasan, Nageswaran pushed back against industry concerns over global uncertainty. “You have to live with uncertainty for the next two decades. It cannot be a reason to postpone investments,” he said.
“The challenge is no longer just about producing more, but about producing competitively, resiliently and at scale in a fragmented world,” Nageswaran said.
He also pointed to a changing mindset among newer business generations, suggesting a declining preference for manufacturing. Continued import dependence, he warned, could undermine India’s long-term growth ambitions.
On trade policy, Nageswaran said recent free trade agreements are not just about market access but also about exposing domestic firms to global competition. “A large domestic market can breed complacency. Exposure to competition is essential to build export capability,” he said, citing East Asian economies as examples.
Published on April 29, 2026
aniltikotekar4sme.com 