India's development trajectory requires a significant recalibration to align with its inherent strengths, especially its abundant labour force. Chief Economic Advisor (CEA) V Anantha Nageswaran emphasized this vital point on May 29, urging policymakers to reconsider the prevalent capital-intensive growth model inherited by India. According to him, this inherited framework is "alien to our core strength," given that India is fundamentally a labour-rich country.

The Need for Labour-Intensive Growth

India’s current model, which heavily relies on capital, machinery, and technology investments, does not leverage its demographic advantage. The CEA advocates for targeted policies that promote labour-intensive manufacturing sectors capable of generating substantial employment opportunities. This shift is crucial for driving equitable growth and harnessing the demographic dividend India enjoys.

By focusing on labour-intensive industries, India can simultaneously address its job creation challenges and scale up manufacturing—a sector vital for economic self-reliance and export growth. This approach aligns with the government’s vision of Viksit Bharat 2047, which emphasizes sustainable and inclusive development.

Balancing National Priorities and Environmental Goals

Nageswaran highlighted the importance of prioritising national developmental goals before pursuing longer-term global commitments like net-zero emissions targets for 2070. Developing countries like India face unique challenges, including competing on a global stage with economic handicaps.

To level the playing field, there is a need for calibrated trade policies that allow some degree of protection for domestic industries, helping them mature and become competitive internationally. This balanced approach can support domestic manufacturing without compromising on global environmental responsibilities, which can be phased in gradually.

Trust and Societal Barriers to Growth

One of the less discussed but critical challenges flagged by the CEA is the low level of societal trust—both among citizens and between the government and the public. According to him, this lack of trust impedes the scalability and competitiveness of businesses and the economy as a whole.

Building trust across public and private networks is essential to overcome barriers in scaling up enterprises and infrastructure projects. Without trust, efforts at deregulation or policy reform may not achieve their intended impact.

Technology, Youth, and Distributional Fairness

While artificial intelligence (AI) and robotics can significantly boost productivity, Nageswaran cautioned that their benefits will only be sustainable if they are distributed fairly across society. There is a need to consider carefully what India offers its youth, especially as issues like increased screen time and consumption of ultra-processed food could threaten the health and productivity of the demographic dividend.

The challenge lies in balancing technological advancement with inclusive growth strategies that ensure the youth population is adequately prepared and healthy.

Regulatory Environment and Cost of Doing Business

Nageswaran stressed that India should focus not just on the ease of doing business, but also on reducing the overall cost of doing business. This means rethinking regulatory approaches to strike a balance between compliance and encouraging economic activity.

He endorsed the use of regulatory impact assessments to guide policymaking, ensuring that regulations support growth without becoming a burden.

Critical Mineral Dependence and Energy Transition

India’s growing dependence on minerals and rare earths was also a concern highlighted by the CEA. For instance, every new solar panel installation adds to India’s reliance on external sources of these crucial materials.

While transitioning to cleaner energy is necessary, Nageswaran emphasized the need for a phased approach to energy transition to avoid supply vulnerabilities and economic disruptions.

Positive Growth Prospects and Currency Outlook

Despite these challenges, the outlook for the Indian economy remains promising. The CEA predicted that India will sustain a growth rate between 6.3% and 6.8% for a considerable period. Factors contributing to this positive outlook include:

• Moderating energy prices

• Supportive monetary policies

• Tax relief measures

• A favourable monsoon season

He also dispelled concerns about a weakening rupee, stating that the currency is unlikely to depreciate sharply as it did over the past three decades. Instead, India will likely live with a stronger rupee, shifting private sector focus toward innovation and productivity rather than relying on currency depreciation for competitiveness.

Mantras for Avoiding the Middle-Income Trap

To escape the so-called middle-income trap, Nageswaran offered three mantras: trust, deregulate, and reciprocate. Building societal trust, reforming regulations, and creating reciprocal economic relationships will be key to ensuring sustained economic progress.

Regional Disparities and Infrastructure Development

Lastly, the CEA underscored the importance of harmonising best practices across different Indian states to fix uneven investment flows. Improving infrastructure and developing a skilled workforce are critical to bridging regional gaps and ensuring balanced growth throughout the country.

In conclusion, CEA V Anantha Nageswaran’s address provides a comprehensive roadmap for India’s economic future — urging a shift to labour-intensive growth to fully utilize the demographic dividend, fostering trust and balanced regulation, managing technological impacts carefully, and pursuing a phased energy transition. If India successfully implements these strategies, it stands poised for sustainable and inclusive development aligned with its national goals for 2047.

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