 "V Anantha Nageswaran, Nageswaran, Anantha")
Trust, deregulation and reciprocity are key for India to avoid the middle-income trap, Chief Economic Advisor (CEA) V Anantha Nageswaran said on Thursday, stressing that a significant share of regulatory overreach is sometimes due to the non-reciprocity of trust on the part of the private sector.
Post the 90-day period of tariff pause by the US, India may enjoy an advantage in some sectors, the CEA said at the CII Annual Business Summit here.
“There will be some sectors where India did not enjoy an advantage before. It may enjoy an advantage later, from the tariff perspective. That’s also an opportunity, and therefore it is quite possible,” Nageswaran said.
He also said India should not be overly consumed by global uncertainty, especially with a domestic economy where private consumption accounts for 60 per cent of GDP.
He said achieving a growth rate between 6.3 per cent and 6.8 per cent and sustaining it for a longer period was a reasonable prospect with various silver linings, such as lower energy prices, more accommodative monetary policy compared to 2024, and forecasts of an above-normal monsoon.
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Underlining the importance of deregulation in the economy, Nageswaran said a larger focus needs to be on lowering the cost of doing business in the government than ease of doing business.
“Whether it is in the use of the land space available, floor space index or prohibiting women from working in certain areas…These are all the areas where much more relaxation can and should be done in the interest of rising overall output and employment as well,” the CEA said.
Nageswaran noted that the global model of capital-intensive growth did not align with the core strength of India and there was a need to ensure that there was no there is no trade-off between the interest of capital and that of labour.
“The growth in profitability has not only exceeded that in capital formation, but has also trailed the growth in compensation, which includes hiring,” he said, while adding that meeting India’s capital required a steady growth in household incomes and saving.
He said that without an adequately employed workforce, which will have implications for economic security and social stability, the private sector cannot thrive.
“We are a country that has to create 8 million livelihoods at the minimum every year, excluding agriculture. Therefore, we have to have policies that rely on capital led growth…also policies in the private sector that are able to focus on labor intensive manufacturing as well.”
Citing a paper by an independent AI analyst in Berkeley, California, the CEA said building end-to-end AI agents is a technological and policy choice or a business decision. “You can decide where you want to stop and where you want to deploy human labor as well…This decision should remain at the forefront of our policy or non-policy conversation,” Nageswaran said.
