The Chief Economic Advisor to the Union Government, in an interview with BW Businessworld, opens up on “Viksit Bharat 2047”, state-led growth, why India should become ‘indispensable like China’, and more. The CEA answered BW Businessworld’s questions through written replies. Excerpts:
In a recent talk on making India a developed nation by 2047, you said India should ‘become indispensable like China’. Can you please elaborate?
For a large economy with a young population, it is easy to be comforted by the promises of what ‘largeness’ can offer – a strong consumption base, cheap labour and steady growth. However, to become a growth wonder and achieve the ambitions of Amrit Kaal, our economy must also strive towards becoming indispensable across sectors and supply chains. This indispensability will allow India to exercise its strategic autonomy and deepen ties with like-minded partner nations in a rapidly inward-looking global economy. Indispensability means geopolitical leverage.
Developing indispensability requires long-term thinking on the part of policymakers and institutional stakeholders, corporations, and individuals. It requires heavy investment in R&D, an improvement in corporate capital formation and a rise in the quality of education. It demands a deliberate staving off from ‘jugaad’, quick-fix solutions.
While the past decade of growth focused on the rapid scaling of hard infrastructure required to create competitiveness, the current decade involves a focus on quality, extensive deregulation and dedicated spending towards developing the soft infrastructure of the county, i.e., education and innovation. Combined, these will be decisive in elevating India’s indispensability quotient.
You also said India needs to prioritise “manufacturing, education, job creation”. Can you please elaborate? Apart from various government initiatives that are in the public domain, and that we know of, is there a plan/blueprint that the government is considering to further boost, say, manufacturing and job creation?
Production-linked Incentive Schemes are operational. Physical infrastructure upgradation boosts manufacturing by enhancing connectivity, including last-mile connectivity. A National Manufacturing Mission is in the works. The government has operationalised the two research funds announced in the last two budgets – ANRF and RDIF. The employment-linked incentive scheme announced in the July 2024 budget has been operationalised. The deregulation committee will soon be announced. Deregulation will lower the fixed costs of doing business and encourage hiring.
There is a view that, considering India’s strength in Services, it should further consolidate on this. What do you think?
That would be a folly. The states in India are diverse. Some have strengths in agriculture; some in manufacturing; some in tourism, some in services and a few in all or some combination. Individual states can be advised to follow their core strength. But, a country as large and diverse as India cannot afford a concentrate risk by focusing exclusively on one sector over others. India needs to raise agricultural productivity, pursue a higher manufacturing share of GDP and focus on labour-intensive and high-value-added services. The manufacturing sector can be a combination of labour-intensive manufacturing in some states and capital-intensive manufacturing in others.
In the realm of policy making, it appears, today, there’s also a thrust on state-led, state-driven growth. A recent Niti conclave, for instance, was around “Viksit Rajya, for Viksit Bharat”. Also, states are increasingly setting for themselves targets like $ 1 trillion economy target; states are setting up Economic Advisory Councils; there is also a talk of “champion states” leading India’s growth. Is there a way in which this movement can be further boosted?
Several of India’s next-generation reforms will unfold at the level of states. These next-generation reforms will seek to raise the employability of the youth, tailor education to the needs of the day, and boost growth in the manufacturing and agricultural sectors. In this context, it is indeed encouraging to see that several states are targeting a USD 1 trillion economy and crafting their growth trajectories with the help of their advisory councils. States are also proactively pursuing deregulation and improving their ease of doing business. For instance, since the start of this year, three states and 1 Union territory - Punjab, Uttar Pradesh, Goa and Chandigarh - have amended their factory regulations to simplify processes and reduce regulatory bottlenecks.
You ask if there is a way in which this movement can be further boosted – competitive federalism provides the answer. As states compete with one another, they in turn raise their competitiveness. This is a self-reinforcing process. Over the last decade, the Centre has exercised several policy levers which enhance competitive federalism. These include the rollout of the GST, which facilitated state-to-state movement of goods and services; the creation of a digital public infrastructure, which levels the digital playing field across states in India; and large-scale national missions such as the National Logistics Policy (NLP) and the PM Gatishakti, which ensures uniform infrastructural growth across states.
There is a view that the South leads the North in many ways – socio-economic changes, human development indicators, growth of businesses, business leaders, startups, startup founders, and so on. Is there a way or a thought in which Southern states can be encouraged, maybe, to handhold some northern states, and also, is there a way in which Southern states’ aspirations figure, maybe, more prominently in national aspirations?
While the southern states show better socio-economic performance on average, the gap between the states in the North and the South is narrowing. Northern states continue to display impressive performance in areas such as start-up culture, manufacturing sector growth and export orientation. For instance, UP ranked third for electronic exports in FY-25, just two ranks below TN, which topped the list. Similarly, Haryana received FDI inflows that were at par with Telangana for the recent financial year.
Bilateral collaboration between states is indeed a pathway to aid the seamless flow of knowledge and capacity building. For instance, Telangana and Rajasthan recently signed an MoU for thermal projects worth Rs 22,000 crore, leveraging Rajasthan’s abundant solar power and Telangana’s energy expertise. Similarly, industrialists from Tamil Nadu are reported to set up shop in Haryana, promising investments worth Rs 3000 crore. Such state-to-state collaborations are always a welcome development.
As to the last sub-question, present-day national aspirations reflect the collective aspiration of the whole of India, which is to become a developed nation by 2047. While states differ in their stages of growth, we must be united at the level of goal-setting for the nation as a whole.
What are the lessons from India’s success in its space mission story, or its success in its renewable mission story, to name another example, that can be replicated across sectors, especially in India’s economic growth?
India’s achievements in its space program and renewable energy journey highlight a few important lessons relevant to our broader economic growth. First, they demonstrate the value of long-term commitment to a vision. In both cases, we invested steadily over decades, despite initial resource limitations. This perseverance has paid off and has allowed us to build capacity, foster innovation, and eventually achieve outcomes that seemed ambitious at the outset.
Second, they show the benefits of combining public sector resources with private sector participation. This complementarity between policy direction and entrepreneurial energy is crucial. Finally, both experiences underscore the importance of designing solutions suited to India’s unique context. Our space program was always frugal yet effective, and in renewables, we focused on scale and cost reduction. This ability to adapt global technologies to domestic needs, while keeping costs manageable, is a principle that can guide us in the future.
For India to build resilience, our efforts must now focus on technologies such as semiconductors, artificial intelligence, and nuclear energy, all of which are critical to India’s development journey. The semiconductor ecosystem is budding, and recent initiatives from the Government of India are a step in the right direction. We must continue building on this strong foundation and aim to expand our talents across the semiconductor value chain, right from design to manufacturing.
In artificial intelligence, India has the opportunity to capitalise on the ‘second mover advantage’ and take a path different from those adopted by the developed world. Small models, built on an open-weight/open-source platform for task-specific applications, can help cater to a diverse range of requirements in the economy while ensuring that AI is not resource-intensive and is human-centric. Lastly, innovations in nuclear energy are crucial to meet our growing energy demands sustainably. Small modular reactors and realising our goal to deploy three-stage nuclear power at scale will help secure India’s future energy requirements.
In India’s quest for a developed economy status by 2047, what are the short-term challenges, and what are the challenges, long-term?
In the short term, India’s challenges are about maintaining stability while keeping growth on track. We face the task of ensuring energy affordability and security even as we pursue an energy transition. Volatility in global commodity prices and the strain of power sector reforms make this a delicate balance. Employment generation is another immediate priority, especially with the rapid advance of artificial intelligence. We must create jobs that absorb our large young workforce and equip them with the skills to complement, rather than be displaced by, emerging technologies. At the same time, fiscal prudence and inflation management remain near-term priorities in an uncertain external environment.
Over the long term, the challenges shift towards structural transformation. The rise of manufacturing and SMEs must go hand in hand if India is to secure sustainable growth. This requires not just capital but also steady improvements in education, skilling, and the mental and physical health of our young population. Another long-term challenge lies in the balance between labour and capital. As technology and AI reshape income distribution, ensuring that growth remains inclusive will be crucial. Similarly, food security and agricultural productivity must be raised in line with population needs and climate pressures. All of these must be facilitated while deregulating the economy through ‘nuts and bolts’ reforms pursued collaboratively at the state and local levels. Building trust between the government, the private commercial sector and households will lead to lower regulation and compliance costs, faster execution and a rapid scaling up of the economy. Improving state capacity and accountability for governance will be critical to achieving our long-term vision.
Put simply, in the short term, India’s challenge is navigating volatility and delivering on execution. In the long term, it is about building the institutions, capabilities, and productive capacity to make growth durable, equitable, and resilient.
In your talk, you also talked about an uncertain, volatile global environment, probably for the next decade or two. In another context, you said recently that the economic impact of US tariffs on Indian exports will ease “within a quarter or two”. Even as talks with the US are underway, how does India deal with future uncertainties like these?
The two points are not contradictory but illustrate different time horizons. In the case of tariffs or similar trade measures, the direct economic impact on India may wane due to our diversified export basket and the adaptability of our firms. They can find alternative markets or reconfigure supply chains within a reasonable timeframe. This is why, when specific disruptions arise, the effect is usually felt for a few quarters before adjustments occur.
However, when we look at the global environment over the next decade or more, the uncertainty is broader and systemic. Shifts in geopolitics, technology, climate, and finance are altering the landscape in ways that are harder to predict and manage. Policymakers around the world are grappling with the search for a new equilibrium, and things will definitely take time to settle.
For India, dealing with these requires resilience rather than reliance on forecasts. This means diversifying our trade relationships, strengthening domestic demand as a stable anchor, building financial buffers, and investing in innovation and competitiveness. At the same time, the shifting world order also presents opportunities for India to proactively engage in international forums to shape rules on trade, technology, and climate in ways that reflect the developing world’s interests. Uncertainty, by definition, cannot be eliminated, but we can position ourselves in a way that allows us to adapt quickly and continue to grow despite it.
While India stresses “Aatmanirbhar Bharat”, “Swadeshi”, and ideas like “Vocal for Local”, is there a challenge that India’s economic trajectory may also be a function of global uncertainties, going forward?
It is important to view “Aatmanirbhar Bharat” and related ideas not as isolationist, but as resilience-building strategies. The intention is not to disengage from the world, but to ensure India is not overly vulnerable to external shocks. The numerous free trade, investment and economic partnership agreements India has concluded with various nations are proof of this. The recent experience of supply chain disruptions, energy price volatility, and financial market swings has shown us that an economy of India’s size cannot depend solely on global conditions remaining benign.
This is something we have discussed at length in the Economic Survey as well. Strengthening our domestic capacities and re-energising our internal growth drivers provides a cushion against uncertainties. That said, India’s growth story will, of course, remain linked to global trends. Trade, investment, technology flows, talent, and climate agreements influence our trajectory. This is why the approach is one of calibrated integration: remaining open and competitive internationally while simultaneously building self-reliance in critical areas. A country of our scale has the advantage of a large domestic market, but that does not diminish the importance of global engagement.
In practice, therefore, India’s strategy is about balance. Global uncertainties will continue to matter, but they need not derail our long-term trajectory if our fundamentals remain strong.
Borrowing from the subject of your recent talk, if one were to sum up, what are India’s challenges and prospects in the prevailing global economic trends today?
India’s challenges and prospects must be understood together, because they are two sides of the same coin. On the challenge side, the prevailing global trends point to a more fragmented trading environment, rising protectionism, and technological realignments that can alter competitiveness. Geopolitical tensions add to energy and commodity price volatility, while climate change imposes economic and environmental costs. For a country like India, which is still expanding its industrial base and working to create employment at scale, these headwinds make the external environment more uncertain than in previous decades.
At the same time, the very same trends create opportunities. As global supply chains diversify, India is increasingly considered a trusted partner. Our demographic profile, growing digital capabilities, and domestic market scale allow us to play a larger role in manufacturing and services alike. The global focus on sustainability aligns with India’s leadership in renewables, where we have already demonstrated ambition and capacity. Furthermore, the acceleration of technology adoption worldwide dovetails with India’s strengths in digital public infrastructure, which can be leveraged domestically and internationally.
So, while the global context is less predictable, India’s prospects remain strong if we continue to invest in resilience and competitiveness. The essence of the challenge is to convert uncertainty into opportunity by staying adaptable, strengthening institutions, and ensuring that our growth remains broad-based. In doing so, India can not only withstand the prevailing global trends but also shape them in ways that support our development journey. |
