In a wide-ranging interaction at the 30th edition of Delhi Dialogues, Chief Economic Adviser V Anantha Nageswaran challenges prevailing narratives on rural distress, private investment, inequality and data credibility, arguing that India’s policy choices must be judged against global realities rather than static benchmarks. Excerpts:
Santwana Bhattacharya: There is a perception of rural economic stress and a call for a major course correction in economic policy. How do you assess the rural economy and the need for policy shifts?
I must challenge the premise. The rural distress narrative has reversed post-Covid. Earlier, a K-shaped recovery was used to describe a booming urban economy and a lagging rural one. Today, the same K is invoked to argue that rural India is strong and urban India is weak.
The data does not support a stress narrative. Rural real wages are growing positively and accelerating. We see this reflected in strong rural sales of two-wheelers, four-wheelers and tractors.
As for course correction, we must recognise the significant policy actions already taken. Less than a year ago, substantial direct tax relief was provided. More recently, major indirect tax relief was announced. The RBI has cut policy rates by 100 basis points and introduced liquidity measures. Since the elections, the government has launched employment-linked incentive schemes, apprenticeships and skilling missions.
Household savings are another important indicator. When savings fell below 5 percent of GDP, there was concern. This rose to 5.3% in 2023-24 and, according to the RBI, reached 6% in 2024-25. Financial liabilities have declined while financial assets have increased. In a country as large as India, anecdotes can always be found to support any belief, but the macro data does not point to distress requiring an emergency course correction.
Santwana Bhattacharya: Public capital expenditure has driven growth. What will trigger a broad-based private capex cycle?
We should rely on data rather than perception. Post-Covid, we now have three years of national income data. The year 2021-22 saw a strong bounce-back. Private capex growth in 2022-23 was reasonable. The disappointment of 2023-24 has disproportionately shaped public perception. Bottom-up data from over 1,700 companies shows that private capex rebounded in 2024–25.
India’s gross fixed capital formation-to-GDP ratio is around 31%. In today’s global environment, marked by uncertainty and intense manufacturing competition from China, this is a creditable outcome. Expecting a return to the 35-37% ratios seen during 2003-08 is unrealistic. Developed economies are seeking to onshore production, while Indian firms must invest both at home and abroad to retain markets in the face of Chinese competition.
Dipak Mondal: The IMF has given India a ‘C’ grade for national accounts data quality. This fuels scept icism about high growth numbers. Your take.
This is not an elephant in the room, it is a minor issue. The IMF introduced letter grades only in 2024. India’s median rating across all data categories remains a “B”. The “C” applies only to national accounts.
Growth is measured by comparing like with like over time. The same database, with the same limitations, is used year after year, which makes growth comparisons valid regardless of deficiencies. Issues like base-year revision and the use of a single deflator are well known and are being addressed by the Ministry of Statistics, with improvements expected by 2026.
Dipak Mondal: Critics argue that the GDP deflator is too low and inflates real growth.
That argument is procedurally flawed. For quarterly GDP estimates, real GDP is estimated first for about 60% of the economy and inflation is added later to derive nominal GDP. It is not a process of deflating a nominal number. Therefore, the criticism doesn’t apply to quarterly estimates.
Pushpita Dey: The IMF suggests the $5 trillion economy target is slipping. What is your assessment?
Nobody, least of all the IMF, has said it is not possible. In fact, the IMF’s latest World Economic Outlook projects India’s GDP at $6.6 trillion by 2030–31.
As of March 2025, India stood at $3.9 trillion. Reaching $4 trillion this year requires only about 2.5% growth in dollar terms. Historically, India’s dollar GDP has grown at an average of 8.6% annually over the past three decades. Rupee depreciation may moderate dollar growth this year, but the medium-term trajectory remains intact.
Pushpita Dey: How do you justify relaxing Quality Control Orders when cheap Chinese imports remain a concern?
Policymaking is about trade-offs and iteration. If Quality Control Orders on intermediate goods make finished products unviable and hurt small and medium enterprises, they must be fine-tuned. Policy is not cast in stone but requires continuous calibration between protecting upstream industry and preserving downstream competitiveness.
Arshad Khan: US tariff hikes have affected certain manufacturing sectors. How is the government responding?
We have announced targeted relief, including measures to ease cash-flow constraints and support export market diversification. Free trade negotiations with the Gulf, Canada, the UK and the EU continue, while engagement with the US remains ongoing. Industries have adapted by finding alternative markets, and the impact appears milder than initially feared.
Amitava Sanyal: When will India become a developed nation? Can 8% growth be sustained?
Development is not merely an income threshold. It must be assessed holistically, including well-being, sustainability and liabilities. Sustaining 8 percent growth becomes mathematically harder as the base expands. Even growth that takes India to a $20–25 trillion economy by 2050 would be a monumental achievement. The 2047 target is aspirational and depends on nominal growth and exchange rates.
Amitava Sanyal: With 800 million people receiving free food rations, what does that say about the economy?
That is a question of political economy and I will leave it at that.
V V P Sharma: Has inequality increased and are the rich taxed adequately?
It depends on the metric. Post-fiscal inequality, after taxes and transfers, presents a different picture, particularly given subsidies on food, power and education. Capital is far more mobile than labour and excessive taxation risks unintended consequences. The objective of public policy should be to expand equality of opportunity.
Amitava Sanyal: Why has manufacturing’s share of GDP remained near 17% despite the PLI push?
China’s massive overcapacity depresses global prices and makes it extremely difficult for other countries to build competitive manufacturing scale. The PLI scheme is helping India gain footholds in strategic sectors, but the challenge remains significant.
Preetha Nair: There is fear new labour codes promote a hire-and-fire culture.
This debate has existed since the 1990s. Any dynamic system requires freedom of exit to enable entry. The issue is balancing the rights of those who have jobs with those seeking employment, not framing it as a zero-sum conflict.
Santwana Bhattacharya: What are the next major reform frontiers?
Land-use reform for industry, power distribution reforms and energy transition legislation are critical. We also face challenges from artificial intelligence, climate transition costs and the mental and physical health of young Indians. The deepest reform is building a high-trust society, where credible institutions enable economic relationships beyond kinship networks.
Santwana Bhattacharya: Industry leaders argue India needs a stronger R&D push. Is there a plan?
The building blocks are in place. The government has committed `1.5 lakh crore over five years through the Anusandhan National Research Foundation and Research and Development Infrastructure Fund for both research and commercialisation. The task now is effective governance and execution to translate funding into innovation.