CEA says AI-era tech shift brings new policy duties for regulators

CEA V Anantha Nageswaran said AI-enabled finance introduces new policy responsibilities, adding that regulators must strengthen oversight as India deepens integration with global capital markets

Financial stability in the coming decade may depend considerably on regulators’ ability to understand and supervise risks embedded in digital- and artificial intelligence (AI)-enabled finance, Chief Economic Advisor (CEA) V Anantha Nageswaran said on Thursday.

 

Speaking at the Global Securities Markets Conclave 2.0, organised by the International Financial Services Centres Authority at the Gujarat International Finance Tec-City International Financial Services Centre, Nageswaran said that technology alone cannot build vibrant financial markets; regulators, market participants, and innovators must play complementary roles. Technological transformation, he said, introduces new policy responsibilities. 

“Policymakers can provide stability and predictability, but liquidity, innovation, and market depth ultimately depend on investors, intermediaries, and institutions,” Nageswaran said. 

The CEA said India’s strategic patience in adopting AI is a strength, not a limitation, and that a second-mover advantage allows for careful observation of technological maturation, regulatory adaptation, and business model consolidation before committing large-scale capital.

 

“It is not necessary to be the first mover in every technological wave to be a long-term beneficiary,” he said, observing that ownership concentration, related-party transactions, and valuation transparency in parts of the AI ecosystem have come under scrutiny.

 

This approach, he said, would allow selective integration into AI-driven productivity gains while avoiding disproportionate exposure to valuation cycles.

 

Nageswaran said India’s ambition to become a developed economy by 2047 will require sustained mobilisation of both domestic and global capital. The objective, he added, is not merely to attract financial flows but to channel them into productive investments that strengthen infrastructure, foster innovation, and generate employment.

 

“Embedding AI within this broader development framework may yield more durable gains than positioning the Indian economy as a speculative proxy for global AI exuberance,” he said.

 

India’s integration with global capital markets is deepening, not just in scale but also in composition and quality, Nageswaran said. As cross-border finance expands through technology-enabled platforms, managing capital mobility responsibly becomes essential. “Greater efficiency in capital markets must be matched by resilience against volatility.”

 

He urged investors, asset managers, and financial entrepreneurs to bring patient capital and constructive information and to partner regulators through sandboxes that build resilience rather than evade scrutiny.

 

The CEA cautioned that algorithmic trading and AI-driven investment strategies can transmit shocks rapidly across jurisdictions and amplify market movements. “Supervisory frameworks, therefore, must evolve to detect model-based herd behaviour, operational vulnerabilities, and concentration risks in critical AI supply chains,” he said.