Export or Exit: CEA Nageswaran Calls for Performance-Linked Industrial Support
CEA V Anantha Nageswaran urges India to link manufacturing support to export competitiveness to combat global supply shocks and geopolitical tensions.
India's Chief Economic Advisor (CEA) V Anantha Nageswaran has sounded a call for a strategic pivot in the nation's industrial approach. Emphasizing that the era of seamless global trade has shifted, Nageswaran asserted that India industrial support export competitiveness must become the cornerstone of domestic manufacturing policy to shield the economy from volatile global supply shocks.
Speaking during the inaugural session of the ISID-IDRA Fourth National Conference, the CEA warned that the world has entered a phase where geopolitical contests for real resources will define the 21st century. He noted that the pandemic and subsequent global disruptions have proven that India can no longer take the smooth availability of essential goods for granted.
The End of 'Easy' Imports
Nageswaran highlighted that the last six years have been characterized by a series of supply-side shocks, including semiconductor chip shortages, trade retaliations involving tariffs, and a persistent vulnerability to crude oil fluctuations. He argued that in such a climate, the ability of a country to secure what it needs depends heavily on the leverage it holds globally.
To counter this, he suggested that governments and industries must prioritize the creation of domestic capabilities. By reducing dependence on supplies that could be weaponized or restricted during geopolitical tensions, India can better safeguard its economic sovereignty.
A New Era of Import Substitution
While India has long pursued import substitution, the CEA insisted that the current strategy must be fundamentally different from the past. He called for a "quid pro quo" arrangement with the industry, where government support is not a blank check but is tied to specific outcomes.
- Export Competitiveness: Industries receiving support must prove they can compete in international markets.
- Import Parity: Domestic products must be able to match the pricing and quality of imports.
- Time-Bound Protection: Support should be temporary, with protection withdrawn once a domestic industry becomes globally competitive.
Nageswaran cautioned that providing protection without demanding investments in productivity could actually weaken industrial resilience rather than strengthen it.
Economic Growth vs. Structural Stagnation
The CEA's remarks come against a backdrop of strong macroeconomic indicators. He cited impressive figures for the first quarter of 2026-27, including:
- Real GDP growth of 7.8 per cent.
- Manufacturing gross value added (GVA) growth of 9.2 per cent.
- Gross fixed capital formation growth of 11.9 per cent.
However, a closer look at the data reveals a structural challenge. Despite the growth in value, manufacturing's share of the gross value added remained nearly stagnant, sitting at 14.8 per cent in 2025-26, barely moving from the 14.7 per cent recorded in 2022-23.
Furthermore, the trade balance in core merchandise showed a concerning trend between April and September 2026, with imports rising by 19.7 per cent year-on-year, outpacing the 16.2 per cent growth in core exports.
The Limits of Monetary Policy
One of the most critical points raised by Nageswaran was the limitation of traditional economic tools. He explained that conventional monetary and fiscal responses are designed to fight weak demand, but they are far less effective when the root cause is a physical shortage of goods.
"Monetary policy will be much more difficult to implement in a world of supply shocks. Fiscal support would be more effective when directed towards production and productivity."
The CEA concluded by urging the building of buffers for essential commodities and the strengthening of domestic manufacturing. By doing so, India can not only withstand external disruptions but also evolve into a pivotal supplier for the global market.