To achieve the status of a developed economy, the Indian economy needs to focus on multiple sectors: Nageswaran

India’s economy is too complex to focus solely on sectors such as manufacturing and services to achieve developed country status, said chief economic advisor V. Anantha Nageswaran, stressing the need to pursue multiple paths simultaneously.

Speaking at the Mint India Summit @2047, Nageswaran highlighted the latest economic survey which noted increasing industrial competition across the world, with even developed countries trying to regain their share in the manufacturing sector through proactive policies.

As the service sector’s prospects are impacted by technological developments such as artificial intelligence, India has no option but to keep the agricultural engine running as an important lever for economic growth prospects, Nageswaran said.

“There is a lot to be unlocked (in the agriculture sector) as we move from cereals to other value-added crops and allied sectors, that is mainly fisheries, poultry etc. and using all these three related services and crop diversification to improve food processing and cold storage and agricultural entrepreneurship etc. There is so much more value to be unlocked than treating agriculture as a vocation from the past,” Nageswaran said.

“And it’s important to remember that this is an opportunity, but also a challenge, because human bandwidth is relatively limited, just like the bandwidth of policymakers, the private sector and economists. But we need to focus on all applications and all sectors, whether it is services, education, healthcare, health information technology, banking and insurance,” he added.

India’s goal of becoming a developed country by 2047 faces global and domestic challenges, according to the Economic Survey 2023-24, released in July ahead of the adoption of the annual budget. The country’s priorities include securing supply chains, balancing energy needs with economic and environmental goals, and addressing the impact of emerging technologies.

The study identified several key factors hindering India’s medium-term economic growth, which include increasing geoeconomic fragmentation leading to resource nationalism and the trade-off between operational efficiency and resilience.

“And when it comes to industry, low-skilled, medium-skilled and high-skilled industries, we need all of them because in a global context, sometimes we also need to focus on the high-tech sector because some of the key supply chains may not be accessible,” he added.

Nageswaran said had India continued massive fiscal and monetary expansion during the pandemic, it could have avoided a 5.8% GDP contraction in FY21; However, this would likely result in higher inflation, increased interest rates and increased government borrowing costs, which would negatively impact stock market performance and limit growth seen in the following years, he said.

“So there is some merit to the government emphasizing macroeconomic and fiscal prudence that is not being taken into account because we don’t see it every day,” he added.

In response to criticism that India’s economy is not industrialized enough, Nageswaran highlighted two major obstacles to the manufacturing sector and capital accumulation: the non-performing assets crisis, which has slowed private investment in machinery, and the crisis of non-banking financial companies.

Nageswaran also called for an objective approach to assessing government initiatives such as manufacturing in India and manufacturing’s share of GDP. Their assessment should take into account “once-in-a-century shocks or the huge financial cycle shock that occurred in 2014-2020,” he said.

Nageswaran said governments around the world can only achieve two of the three goals between technology and artificial intelligence by maintaining labor’s share of income and being fiscally prudent.

“In other words, the private sector needs to have a lot of medium- and long-term horizons and look at the social consequences of some of the things we are forced to do because they are,” he said.

“The challenge, therefore, not only for policymakers but also for chroniclers, is to help by being balanced and objective and taking into account all the facts, circumstances and context, and remembering that India’s journey is truly extraordinary and unprecedented,” he added. .