Trump win may ensure India's trade security: CEA Nageswaran at BFSI Summit

Chief Economic Adviser to the Government of India V Anantha Nageswaran shared his thoughts on the impact of the US elections on India's growth at the Business Standard BFSI Insight Summit

Donald Trump’s re-election as President of the United States, along with other key elections around the world, will have long-lasting effects on the energy crisis, climate policy, and international trade, India’s chief economic adviser said on Friday. Speaking at the Business Standard BFSI Insight Summit, V Anantha Nageswaran shared his personal perspective on the evolving global economic landscape and its implications for India, particularly in light of the recently concluded US elections.

 

Nageswaran highlighted that stable and affordable energy prices are crucial for India and other emerging economies, suggesting that fossil fuel prices are expected to remain within a manageable range, barring any major supply disruptions. He also noted that improved security in key trade routes like the Red Sea could help reduce shipment costs for India.

 

 

“I believe there is a positive outcome for energy prices to remain reasonable and affordable, which is vital for India and other emerging economies. Fossil fuel prices, barring other supply disruptions, should be stable and stay within current ranges. They should remain at the lower end of these ranges,” he said. “Enhanced security in the Red Sea passage could lower costs and facilitate smoother shipments from India,” he added.

 

India’s transition to a middle-income economy

Discussing Indian economic growth, Nageswaran stated that the country is on its path to transitioning to a middle-income economy. “For this, we need not only reliable energy supplies but also affordable energy supplies,” he said.

 

He noted that recent US voter rejections of measures that could increase natural gas prices reflect a broader preference for stable energy costs, a trend that could benefit emerging markets like India.

 

“Regarding climate change and energy transition, India may benefit from greater flexibility following these election results,” the chief economic adviser noted.

 

Autonomy on energy and energy transition crucial for India

Nageswaran argued that while renewable energy is valuable, it presents challenges such as high capital costs, land requirements, and external dependencies, which could displace labour and create macroeconomic shifts. He emphasised the importance of energy autonomy, suggesting that each nation should have the freedom to pace its energy transition according to its own needs.

 

“The concept of energy transition is fundamentally incorrect. There is no sequential transition from one energy source to another,” he explained.

 

On climate policy, he criticised developed nations’ reluctance to address their “carbon debt,” describing the proposed European Union carbon border adjustment tax as inconsistent with the Paris Agreement. This policy, he argued, unfairly limits the carbon budget available to developing countries.

 

Politicians have long rejected the notion of ‘free trade’

Addressing trade, Nageswaran critiqued the “religious belief” in free trade, asserting that historically, today’s developed nations followed restrictive trade policies and only advocated for open markets once they had industrialised. 

Reflecting on the development of nations, he noted that developed countries had effectively “kicked away the ladder” for developing economies.

 

He advised India to avoid being overly concerned with global trade conflicts, especially as developed nations have become less committed to free trade ideals.

 

Accelerated capital expenditure to boost domestic growth

Nageswaran called for accelerated capital expenditure in India, in line with budget commitments, to strengthen domestic growth. He cautioned against “preemptive pessimism” and expressed optimism that policy shifts in the global landscape could open new opportunities for India.

 

“Global growth remains uncertain, but the policy stance of the new administration may present new avenues for India,” Nageswaran concluded.

 

Catch all coverage of the Business Standard BFSI Summit 2024 here.