Speaking to ET Now following the release of the Economic Survey, Nageswaran said reforms implemented over recent years have already helped raise India’s medium-term growth potential.
“First of all, it is the reform that we have been able to accomplish in the last several years is the reason why we have upgraded it from 6.5 to 7. Now what would take us from 7 to 7.5 or 8 depends on addressing pending issues related to land reforms, conversion of land from agri to non-agri use, reducing cross subsidisation so that the input cost to industry becomes cheaper and also at some point bringing in fuels into GST, etc, and education sector where we are able to move from enrolment to education quality outcomes. These are all the various reform areas that would help us take it even further,” he said.
The Economic Survey has projected medium-term average growth of around 6.5%, with FY27 growth estimated in the range of 6.8% to 7.2%.
Rupee movement not disruptive yet
On the rupee, which has depreciated by nearly 6.5% since April, Nageswaran said the currency’s recent movement has not yet been disruptive, even as global trade tensions and tariff-related uncertainties persist.
“Look, I cannot give you a forecast and that is not my job either. All I can say is that yes, at this point it is not exactly disruptive, but whether it becomes disruptive or not, at what stage it is to be precise here. And we have also written about what it takes for a country to achieve a strong and stable currency over time. So, I am not in a position to add anything more than that,” he said.
Capex trajectory to be seen in Budget
On public capital expenditure, a key driver of recent growth, the CEA refrained from commenting on whether the pace would be sustained or accelerated, pointing to the upcoming Union Budget.
“Look again, it is a matter of a few days before you see the budget. We can all wait to see what kind of numbers we get,” he said.
DBT and fertiliser reform
Highlighting state-level innovations and the use of technology in subsidy delivery, Nageswaran said fertiliser reforms and better targeting of support to farmers could improve soil health and productivity.
“We have written about it in a box item, it is important to look at the way we compensate farmers for fertiliser prices, whether how to do it in a manner that it helps soil nutrition to be elevated, etc, and also therefore restoring a certain different kind of mix. How it can be done is something we have written about in the chapter on agriculture. There are multiple ways of doing it but it is important to make sure that we are able to nourish the soil and boost productivity rather than leading to a sort of a relatively mindless application of the fertiliser that is the cheapest. So, I think there are multiple ways of achieving the outcome and direct cash transfer is one of them,” he said.
PSB monetisation and fiscal metrics
The Economic Survey has also flagged the possibility of monetising public sector banks and lowering the government shareholding threshold, while retaining control. However, Nageswaran said the feasibility and timing of such measures would depend on policymakers.
“Our job is to highlight some of the possibilities that exist but whether it is feasible, in what time frame and what speed is for policymakers to decide,” he said.
On the shift towards using debt-to-GDP as a key fiscal metric instead of fiscal deficit, particularly given high state-level debt, the CEA said it would be premature to speculate.
“I think it is not appropriate on my part to speculate on it at this point. It needs an application of. We will wait and see what the finance commission has come up with and then we will be probably able to have a conversation on this,” he said.
Capital outflows and policy levers
Addressing foreign portfolio outflows of nearly $22 billion over the past 12 to 15 months, Nageswaran described portfolio flows as cyclical and said India’s policy levers are largely domestic.
“Portfolio flows are cyclical in nature. They come in and they go out. There are multiple considerations. Some of them are within our limit. Some of them are beyond our control. So, we can only act on those that are in our control. We can provide tax certainty. We are not unreasonable in our tax rates. We can look at other processes that we do, etc. But depending on how they perceive the market risk-return trade-off and what they get elsewhere, there are multiple considerations. We can only focus on what we can do in the domestic policy space and we are doing that. Some of these developments could also be because of geopolitical developments, in which case we have little influence over the choices that portfolio investors make,” he said.
Labour-intensive exports and EU boost
Despite higher US tariffs, labour-intensive export sectors have managed to find alternate markets, Nageswaran said, adding that the proposed India-European Union trade agreement could provide a significant boost.
“Actually yes, they have been able to do so, which is why I think on balance we have been able to show incremental growth in our exports. And of course, the latest European Union agreement will definitely give a big boost to labour-intensive manufacturing, footwear, gems and jewellery, textiles, etc. So, as and when the European Union-India trade agreement becomes operational, it will give a very big boost to labour-intensive manufactured exports,” he said.
Agriculture reforms and consumption recovery
The CEA also pointed to further scope for agricultural reforms to enhance productivity.
“Yes, we have written about it in the Economic Survey whether it is with respect to crop diversification or fertiliser reforms or giving more price certainty to farmers in export markets, etc. These are all the various ways in which we can boost agricultural productivity even more in traditional crops compared to what we have been able to achieve in allied agriculture sectors,” he said.
On consumption, Nageswaran said recent tax cuts, lower inflation and rising precious metal prices have supported household spending.
“Yes, we have seen the impact which is why we have been able to anticipate a 7% growth in private final consumption expenditure. Apart from the direct and indirect tax cuts and the low inflation have put disposable income in the hands of the public. And we should also not forget the recent big run-up in the price of gold and silver is also creating a huge wealth effect, offsetting some of the stagnation in the stock market that we have seen in the last few months. So, I think there is enough catalyst at the moment in the economy for private consumption growth to sustain itself,” he said.
