Speaking to ET Now, Aiyar described India’s current macroeconomic setting as a rare “Goldilocks moment” — strong growth, low inflation and broadly stable fundamentals — and warned against disrupting this balance with radical policy moves.
“The most important message to send out at this point is that India is at a Goldilocks moment. This is the phrase of the RBI governor. India is at a Goldilocks moment — very fast growth, much faster than expected, and very low inflation, much lower than inflicted. This is a beautiful position to be in. And if you are in a beautiful position, why rock the boat?”
Aiyar argued that in a world marked by volatility and unpredictable policymaking, particularly from the United States, India’s priority should be resilience rather than experimentation.
“Globally, Mr Trump is not done with his wreckage. We have no idea what will happen tomorrow or the day after. We have to be on our toes, resilient and prepared to meet whatever unexpected challenges come.”
He expects the upcoming budget to focus on continuity rather than disruption, highlighting India’s performance in a challenging global environment.
“I would expect that this is a budget that will boast about what we achieved in the first year of Trump, which was expected to be very tough and has become a Goldilocks year. I do not expect huge radical things in the capital markets or the exchange rate. The fiscal position is by and large okay. Inflation is fine. Growth is excellent. Why rock the boat?”Jobs Can’t Be Budgeted Into Existence
On the question of job creation and boosting disposable incomes, Aiyar struck a sceptical note, arguing that employment cannot be engineered through budgetary incentives alone.
“Frankly, I do not think budgets can create jobs. If it was so simple, the problem would have been solved long ago.”
Drawing from conversations with business leaders, he noted that subsidies for hiring often fail to translate into real employment.
“One businessman told me that even if the government covered the entire cost of a new employee, he would not hire more because that person would have nothing to do. If you give an extra person who does not have work, it destroys work culture.”
According to Aiyar, sustainable job creation depends on faster economic growth rather than fiscal freebies.
“The creation of jobs will come out of overall strength in the economy. We have a long-term trend of 6.5% GDP growth. Can we raise this to 8%? Yes, that would really create jobs. But to do that would require such strong changes that I do not think the political economy will stand up to it.”
He also criticised India’s labour framework, calling it a drag on productivity and formal employment, and expressed little hope of politically difficult reforms being pursued.
‘Hunker Down’ on Sectoral Push
Asked which sectors the budget should prioritise to propel growth, Aiyar cautioned against aggressive sector-specific incentives, especially for export-oriented investments, given the fragile global outlook.
“This is a time when things are very difficult globally. Do not expect Indian businessmen to invest large amounts for export. You would be wasting your money. Please do not spend it.”
Instead, he suggested policymakers acknowledge global risks and focus on safeguarding domestic stability.
“This is not a time for a large number of giveaways. The fundamental growth capacity in India has been built up. At this point, we should be preparing for rocky weather rather than assuming the global market is fully available to us.”
Case for Chinese Investment
One of Aiyar’s strongest arguments was for a rethink on Chinese investment in India, which he believes could strengthen both growth and strategic leverage.
“The Chinese wanted to invest in India. BYD wanted to invest a billion dollars and we said no. I think it is wrong. The more Chinese companies we have in India, each one becomes a pressure point that we can use if required.”
He argued that concerns over security risks are overstated and that allowing Chinese firms into manufacturing value chains could benefit India’s global ambitions.
“If you really want someone who can invest in India for the global market, there is nothing like the Chinese. Please encourage them. Please allow them to come in.”
Capital Flows: Discipline Over Incentives
On attracting foreign capital, Aiyar said global geopolitics, not marginal policy tweaks, will determine investor behaviour in the coming years.
“It is not a little measure here or there from a finance minister that can change capital flows when Mr Trump says one thing and Mr Xi Jinping says another.”
Instead, he believes credibility and fiscal discipline remain India’s strongest calling cards.
“If the finance minister says fiscal discipline will be maintained and deficits will be brought down gradually, that vision will attract money. There is nothing better than being seen as fiscally responsible. You cannot attract capital by a little incentive here or there.”
