India must link industrial support to export competitiveness amid global supply shocks: CEA Nageswaran
New Delhi, October 29
Chief Economic Advisor V Anantha Nageswaran on Thursday called for a shift in India's industrial strategy, saying support for domestic manufacturing must be linked to export competitiveness and the ability to match import prices, as global supply disruptions make access to critical resources increasingly uncertain.
Speaking at the ISID-IDRA Fourth National Conference during the inaugural session, Nageswaran said the country could no longer rely on markets to provide essential goods as smoothly as during the decades before the pandemic.
He said governments and industries must focus on building domestic capabilities and reducing dependence on supplies that could be restricted during geopolitical tensions.
"The 21st century will be marked by a geopolitical contest for real resources," he said, adding that the key question was how much leverage a country could exercise to secure what it needs.
Nageswaran said India's approach to import substitution must differ from earlier strategies and require industries to demonstrate stronger competitiveness. "So in other words, we have to insist on quid pro quo from the industry in terms of export competitiveness, and or import parity," he said.
He also cautioned that protection without investment to improve productivity could weaken industrial resilience. The presentation accompanying his remarks called for time-bound support linked to performance and exports, with protection withdrawn once domestic capacity becomes competitive.
The remarks come as India records strong economic and manufacturing growth amid global uncertainty. He cited real GDP growth of 7.8 per cent in the first quarter of 2026-27, manufacturing gross value added growth of 9.2 per cent and gross fixed capital formation growth of 11.9 per cent.
However, manufacturing's share of gross value added remained broadly unchanged at 14.8 per cent in 2025-26, compared with 14.7 per cent in 2022-23. The presentation also showed that core merchandise imports rose 19.7 per cent year-on-year during April-September 2026, faster than the 16.2 per cent growth in core exports.
"Last six years have seen many shocks with one common element - supply side shocks; semiconductor chip shortages, tariffs linked trade retaliation, vulnerability to crude oil", Nageswaran said.
He further added that conventional monetary and fiscal responses were less effective when the problem was a shortage of goods rather than weak demand.
"Monetary policy will be much more difficult to implement in a world of supply shocks," he said, adding that fiscal support would be more effective when directed towards production and productivity.
He also stressed the need to build buffers of essential commodities and strengthen domestic manufacturing so India can withstand external disruptions and become a more important supplier to global markets.
— ANI
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