NEW DELHI: Chief Economic Advisor V Anantha Nageswaran on Tuesday warned that the global economic architecture that shaped trade and capital flows for decades is undergoing a “structural challenge” rather than a temporary disruption, and said India must prepare for a prolonged phase of geopolitical fragmentation, technology bifurcation and elevated energy risks.
Speaking at the CII Annual Business Summit, the Chief Economic Adviser (CEA) said the world was entering an era where comparative advantage, free capital movement and rules-based multilateralism could no longer be taken for granted.
“What we are experiencing is not a crisis within the system. It is a structural challenge to the organising principles of the system itself,” Nageswaran said.
Flagging the economic fallout of the ongoing West Asia conflict, he said the crisis had become a “live balance-of-payments stress test” for India, with direct implications for inflation, the current account deficit and the rupee.
“Managing the current account credibly, financing it sustainably, and preventing further currency depreciation are the central macroeconomic imperatives of FY27,” he said.
Nageswaran outlined four structural shifts reshaping the global economy — geo-economic fragmentation, technology bifurcation, the energy transition being used as industrial policy, and the permanent repricing of geopolitical risk.
According to him, supply chains built for efficiency are now being rebuilt for resilience, while technology ecosystems are splitting into competing geopolitical blocs.
“The choice of technology partner has become inescapably a geopolitical choice,” he said, adding that emerging economies can no longer assume permanent neutrality.
On energy transition policies in advanced economies, the CEA argued that several governments had failed to transparently communicate the economic costs of green industrial policies, including the relocation of energy-intensive manufacturing to countries with lower environmental restrictions.
“These costs are now being acknowledged openly,” he said, citing changes in the language around “net zero” commitments in international energy discussions.
Highlighting India’s vulnerabilities amid the West Asia conflict, Nageswaran said 87 per cent of India’s crude oil is imported, with a significant share transiting through or near the Strait of Hormuz. Around 60 per cent of LPG imports come from the Gulf, while 38 per cent of India’s annual remittances originate from Gulf nations.
He noted that freight rates from the Middle East Gulf to China had surged sharply and fertiliser and LNG prices had also risen steeply.
“These are not the readings of a temporary shock that will self-correct when the situation stabilises,” he said.
The CEA also cautioned against assuming that advanced economies would necessarily facilitate India’s rise without resistance.
“Incumbent powers, whatever their stated commitments to open markets and fair rules, tend to ensure that the terms of engagement remain calibrated to their interests,” he said.
Calling for strategic clarity, Nageswaran said India must deepen economic diversification and strengthen self-reliance in critical sectors.
He highlighted that India had signed nine trade agreements and comprehensive economic partnerships in the last five years, describing it as the “most concentrated burst of trade diplomacy in independent India’s history”.
The agreements with economies including the UK, EU, Australia and EFTA, he said, reflected India’s effort to reduce dependence on any single geography or economic corridor.
However, he stressed that trade agreements create value “only at implementation, not at signing”, and urged faster regulatory and procedural integration.
“The fracturing of the world order is not only a threat to be managed. For an economy with India’s trajectory, democratic legitimacy and civilisational depth, it is also a genuine opportunity,” Nageswaran said.