A new growth strategy

India must plan for a changing global economic environment

Chief Economic Advisor to the Government of India V Anantha Nageswaran last week cautioned that the widening of the war in West Asia had increased external uncertainties for the country’s economy. The Indian basket of crude oil, for instance, which averaged $83, $82 and $90 in June, July and August, respectively, increased to about $114 thus far in September. Dr Nageswaran further noted that developments in geopolitics, supply chain and technology had placed India at an inflexion point, and what served it well in the post-Independence and post-liberalisation era might not necessarily work in the coming 25 years. Thus, the willingness to change course and reimagine the ways of functioning will be crucial. 

Potential artificial intelligence-led disruption in the labour market, pressures of urbanisation, and anxiety among young people are among the immediate challenges for policymakers. Further, raising the share of manufacturing in India’s output and ensuring sustained growth over the medium- to long-term remain essential to realise the target of making India an advanced economy by 2047. All this will not happen on its own. India needs a cohesive strategy. To be sure, the NITI Aayog held consultations on a vision document for India to achieve the “Viksit Bharat” goal and discussed it with states at governing-council meetings in 2024 and 2025. States such as Chhattisgarh, Madhya Pradesh, Odisha, Rajasthan and Telangana unveiled their Viksit Rajya@2047 vision documents in 2025-26. Several others are working on similar documents. But disappointingly, such a policy paper has not seen the light of day nationally. The current position appears to be that the NITI Aayog will assist states only in designing their state-specific development strategies in the interests of cooperative federalism. 

To be fair, it is important that every state works purposefully to become developed, which will aid the national goal. It is also true that observations in a national-development blueprint on issues under the constitutional purview of states can only be indicative and informational, and these should be covered by states. However, given the seismic shifts taking place globally — multilateralism being replaced by bilateral trade arrangements, erosion of the rule of law, and weaponisation of resources, technology, financial systems, trade routes and currency — there is a need for a national “vision document” or a strategy that sets the broad approach to navigating these currents. Also, a national strategy is essential for India’s manufacturing sector to integrate with global supply chains and leverage the strength of individual states. It is well accepted that for sustained growth in manufacturing, it is important to get the foreign-trade policy right, which is the domain of the central government. States can improve the ease of doing business at their level, but if enterprises cannot sell abroad or import cheaper inputs, investment will remain lacklustre, and growth will suffer. 

The central government, therefore, needs a blueprint that integrates external-trade policies, domestic taxation, financial-sector policies, and issues relating to public goods and infrastructure to accelerate economic growth and development. Such a document can have short-, medium- and long-term goals. It can be periodically revised and possibly debated in Parliament. It will also give businesses a clear sense of direction and policy initiatives, boosting confidence and investment. Indeed, the global environment is not supportive, and India needs to put in more effort to grow at higher rates sustainably. However, for that to happen, it needs an overall framework and strategy.