Several positives for India amid global uncertainty, economy to grow at 6.3-6.8% in FY26 and beyond: CEA Nageswaran

India’s economy is expected to grow in the range of 6.3-6.8% in FY26, as noted in the Economic Survey, and may sustain this level of growth over a longer period despite an uncertain global and political environment, chief economic advisor V Anantha Nageswaran said on Thursday.

He added that there were several positives for India in terms of opportunities in sectors hit by US tariffs, a favourable monetary policy environment that promotes growth, the tax relief given to the middle class this year, and the progress and even distribution of the monsoon.

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“So, if you count these positive factors, to be able to achieve the growth rate between 6.3% and 6.8% that we pencilled in the Economic Survey and sustain it for a longer period seems like a reasonable prospect. The International Monetary Fund agrees with us,” Nageswaran said during his keynote address at the CII Annual Business Summit 2025 in New Delhi.

He added that, according to the IMF, India's GDP in dollar terms is expected to rise to $6.8 trillion by FY31 and that the IMF's implicit forecast on the exchange rate is that the Indian rupee will depreciate by only 0.5-0.8% a year going forward.

'Prepare for stronger rupee'

Nageswaran advised Indian industry to be prepared to deal with a stronger currency in the coming years by becoming more competitive through productivity improvements. Deregulation, both at the policy level and the corporate level, will play an important role here, he added.

He cautioned, however, that industry not be overly cautious in this uncertain global economic and political environment. “From a short-term, cyclical perspective, we should not be overly consumed by global uncertainty. We are a domestic economy with 60% private consumption share of GDP. To sustain this, capital formation by the private sector, taking over the mantle from the government of last six years… investing, hiring, compensating, creating aggregate demand growth and therefore justifying the investments made, is a virtuous endogenous circle, which we need to recognise and tap into,” he added.

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He also urged industry to partner with the government on deregulation to propel growth. “… India has to create eight million livelihoods at a minimum every year, excluding agriculture, and therefore we have to have policies that rely on capital-led growth, and also policies in the private sector that are able to focus on labour-intensive manufacturing,” Nageswaran said.

He added, “But this is a topic where, rather than relying on public policy actions, this dialog has to take place within the business community and also with the government on how are we going to ensure [this], because in the medium term, there is no trade-off between the interest of capital and the interest of labour, because without an adequately employed workforce, which will have implications for economic security and social stability, the private sector cannot thrive."

Close gap between growth in corporate profitability, capital formation'

He said that for sustained growth, the gap between the growth of corporate profitability and the growth of capital formation must be bridged. “It’s very good that the Indian private sector had four-fold growth in profitability (in the past decade), from ₹7.2 trillion to ₹28.7 trillion in March 2024. But if you look at capital formation, there were justifiable reasons why it grew only by 3x… So there has been a small gap in the rate of growth of profitability and the rate of growth of capital formation. If we have to sustain 6.5% growth minimum in real terms and aim for a higher growth rate than that, the gap between capital formation and profitability growth has to close,” he said.

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In this regard, Nageswaran said, corporate profits should not only increase capital formation but also enhance compensation for workers. “… we are facing this challenge that the growth in profitability not only has trailed the growth in capital formation, but the growth in profitability has also trailed the growth in compensation, which includes hiring. And that is something that we can ill afford for the next 25 or 30 years. So that is something that, again, the business sector has to think about,” he said.

‘AI race has just begun’

Addressing another session at the CII event, Amitabh Kant, India’s G20 Sherpa, said that in technology, first movers are never the winners, urging Indian businesses to build foundational models, as the Artificial Intelligence (AI) race has just begun.

“What we did in digital public infrastructure is that we used open source, open API, globally interoperable models, and those models will be the way forward for us. Therefore, India must build its foundational model. I believe India will provide these foundational models for many areas which have challenges for the world,” Kant said.

Talking about the ease of doing business, India’s G20 Sherpa said the Centre has put in the building blocks, and that it is time for states to bring reforms. He also urged the industry to invest in research and development to develop cutting-edge technologies to sustain India’s accelerated growth. He also said that quality control orders (QCOs) must be used rationally to ensure Indian industry can grow. To make Indian Industry more competitive, he suggested that states give land to the industry on long-term lease and privatize discoms to make them more efficient.

Speaking at the summit, environment minister Bhupender Yadav outlined three pillars of India’s unique climate policy architecture for aligning developmental imperatives of emerging economies with ambitious climate goals. These include, he said, a self-reliant circular economy; protecting natural ecosystems and strengthening resilience and promoting adaptation and building climate resilience.

Earlier, commerce and industry minister Piyush Goyal said at the summit that the country is stepping up its international trade efforts and in this regard he would lead high-level business delegations to France, Italy and Switzerland next week. The outreach comes amid growing global interest in India’s market and its role in global supply chains, with several countries together committing over $100 billion in foreign direct investment into the country.

The Summit was also addressed by NITI Aayog vice chairman Suman Bery who said that improving labour productivity is central to India’s aspiration of becoming a developed nation as it would raise living standards and boost growth momentum. Bery said the ‘vikasit Bharat’ vision entails becoming a high-income society that empowers citizens to realise their potential and aspirations, for which India’s demographic dividend is to be effectively leveraged. Such a development success is a means to achieve an end, which is ensuring the dignity of the people, Bery said.