Premature to link market trends to US election: Nageswaran at BFSI Summit

Chief Economic Adviser to the Govt of India, V Anantha Nageswaran, shares thoughts on market trends and growth at the Business Standard BFSI Insight Summit

It is premature to link current market trends to the outcome of the United States election, Chief Economic Adviser (CEA) to the Government of India, V Anantha Nageswaran said at India’s biggest banking, financial services, and insurance (BFSI) event on Friday. Speaking to Business Standard’s Tamal Bandyopadhyay, at the BS BFSI Insight Summit in Mumbai, Nageswaran said that while the Indian rupee recently declined to a record low of Rs 84.37, these fluctuations were already underway before the election.

 

“We shouldn’t overinterpret the market’s initial response to such events,” he said, adding that market dynamics and foreign direct investment trends have deeper, pre-existing drivers unrelated to election results.

   

India’s growth projections remain stable

Despite the Reserve Bank of India’s (RBI) revising its growth outlook to 7.2 per cent, Nageswaran confirmed that the government’s gross domestic product (GDP) forecast remains in the range of 6.5 to 7 per cent. He stressed that these figures serve as directional guides rather than exact targets, noting, “Of course, higher growth would be welcome, but our projections account for various economic headwinds.” 

Commenting on the growing trend of people opting to invest their savings, Nageswaran welcomed the change. He cautioned, however, against excessive speculative activity, which could divert savings into short-term, high-risk investments.

“Speculation has its place, but it should be moderated. Savers moving towards investments is beneficial for the economy as this capital eventually flows back into the banking system, supporting broader financial growth,” he said.

 

India’s high import duties

India’s import duties, often a point of debate for international competitiveness, were another key focus of discussion. When asked about how iPhones in India are expensive despite being produced domestically, Nageswaran pointed out that India had already begun taking steps towards reducing import duties, as outlined in the last Budget.  

 

While high tariffs can help foster domestic industries, Nageswaran highlighted that lower tariffs would be essential for India to become a key player in global supply chains.

 

“Import duties today are lower than they were 20 or 30 years ago. The government’s intent to make India competitive globally was reflected in the recent budget, with reductions in several sectors,” he said, acknowledging that striking a balance between protectionism and competitiveness is a priority.

 

He added that many countries may be practicing different forms of protectionism that we may not be aware of.

 

Need to make agriculture more ‘fashionable’

Agriculture, traditionally seen as India’s foundational economic sector, still holds vast potential, Nageswaran said. With modernisation and value-added processing, he believes, agriculture could contribute significantly to national growth.

 

“Agriculture needs to be redefined as an economically viable sector that attracts new investments and innovation,” he said, adding that it also needed to attract more youth and be a more ‘fashionable’ option.

 

About India’s long-term development, he spoke about the importance of a balanced approach that does not prioritise one sector over another. “Primary (agriculture), secondary (manufacturing), and tertiary (services) sectors must advance together. India’s economic framework should allow each state to leverage its unique strengths, but our overall strategy remains sector-neutral.”

 

Rural demand drives FMCG and auto growth

The CEA highlighted the significance of rural demand in lifting India’s fast-moving consumer goods (FMCG) sector, even surpassing urban growth in certain areas. For example, the automobile sector has seen growth across categories on a year-on-year basis, reflecting strong rural demand. This trend is a positive indicator of sustained economic resilience, especially as rural markets continue to expand.

 

With a population exceeding 1.4 billion, Nageswaran stressed that India’s growth model is distinctive and cannot simply replicate the strategies of other economies. “There is no single template for economic growth that we can follow. We are a nation of 1.4 billion people with diverse needs, and our approach to growth must reflect this uniqueness,” he concluded.

 

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