India to stay on high growth path despite global challenges: CEA Nageswaran

He said the government has a vision to achieve a developed India by 2047. But the biggest challenge, apart from India's size, is that the external environment is not going to be as benign for the next 10-20 years as was the case in the last 30 years, starting from around 1990. Since the country cannot choose its external environment beyond a point, there will be challenges, he explained.

"The task ahead for India is quite immense in a difficult and challenging global environment, but I think the policy determination and identification of priorities, as we have done with emphasis on deregulation, can enable us to maintain the growth advantage even in this difficult environment," Nageswaran said while addressing students and faculty at Columbia University over the weekend.

He further noted that India would need to boost investment rates or extract more value from current investments, as ongoing geopolitical tensions were adversely impacting global capital flows.

He also said that India cannot rely on exports to fuel growth in the same way as it did in the early 2000s.

Every year, exports contributed 40 per cent to GDP growth in the first decade. In the second decade, that contribution came down to 20 per cent, and in the third decade it might be even lower, he observed.

However, at the same time, he said it is not that external trade is not going to matter. It will matter, and the country needs to focus on that because external competitiveness is also a way to boost domestic innovation and growth.

Nageswaran emphasised the need to improve quality, invest in R&D, and upgrade logistics and last-mile connectivity to enhance export competitiveness.

"It has to be the driving force. One has to get up one's game on quality, R&D and internally on logistics and last-mile connectivity. But from a policy perspective, it will make sense to assume that it will not be so easily possible to extract growth out of exports as we used to do before," he observed.

As part of the 'Viksit Bharat' 2047 vision, Nageswaran emphasised the need to strengthen manufacturing and integrate Indian businesses with global value chains, alongside building a robust small and medium enterprise (SME) sector.

"Countries that became manufacturing powerhouses did not do so without having a viable small and medium enterprise sector," he pointed out.

He said India needs to create eight million jobs per year at least for the next 10 to 12 years and raise the manufacturing share of GDP, on the same lines as China.

Nageswaran said that given the country's large size, India has to navigate this huge, complex challenge, and there are no easy answers. As the country strives to create more jobs, Artificial Intelligence may have a big role in taking away entry-level jobs, or low IT-enabled services jobs may come under threat, he added.

Nageswaran said that policy decisions would play an important role in managing this technological disruption.

"It is one thing to prepare the population for a world dominated by AI, but it is another thing to ensure that we find the right balance between labour-centric policies and technology, because technology at the end of the day is not just a choice to be made by technologists. It has to be made by public policymakers," he observed.

"Obviously, in the current environment, sustaining an 8 per cent growth rate is going to be a very tall order. But if we can maintain growth rates of even 6.5 per cent on a sustainable basis over the next decade or two and look to opportunistically increase it to over 7 per cent by focusing on domestic deregulation, that will be the way to go," Nageswaran added.