Indian Economy Shows Resilience Amid Challenges, Says Chief Economic Advisor

Economic Insights from the Chief Economic Advisor

Mumbai, Aug 13: The Chief Economic Advisor (CEA) V. Anantha Nageswaran stated on Wednesday that the Indian economy continues to maintain its momentum, as indicated by various high-frequency indicators. He emphasized that while trade-related challenges are significant, they should not overshadow other pressing issues.

During his speech at an event, Nageswaran attributed last year's consumption slowdown to stringent credit and liquidity conditions, which led the government to implement considerable tax reductions for the middle class in the Union Budget. He also noted that the Reserve Bank of India has reduced policy rates by 100 basis points and ensured a liquidity surplus to bolster growth.

Nageswaran remarked that it is premature to evaluate the potential impact of US tariffs on India's GDP growth.

He highlighted the necessity for India to enhance its capabilities in artificial intelligence (AI) and semiconductor manufacturing to effectively compete with the United States and China.

Identifying key challenges, Nageswaran pointed to energy transition, energy security, the economic implications of AI, and the need for sector-wide collaboration. He called for a strong partnership between public and private sectors, urging the private sector to focus on long-term national goals rather than just quarterly results.

The US leads in AI research and chip design, with major companies like Nvidia, Intel, and AMD, while China has made strides in chip manufacturing through state-supported initiatives. To bolster domestic production, the government has initiated programs like the Semicon India initiative.

Recently, the Cabinet Committee on Economic Affairs approved an investment of Rs 4,600 crore for four semiconductor projects under the India Semiconductor Mission, which will be established in Odisha, Punjab, and Andhra Pradesh.

Nageswaran also noted a shift in consumer spending patterns, highlighting a growing interest in online gaming and options trading. He revealed that in July, monthly expenditures on online gaming reached approximately Rs 10,000 crore, suggesting an annualized spending rate of around Rs 1.2 lakh crore.

Drawing comparisons with speculation in options and derivatives, he stated, “in these situations, it is the house that builds and not speculates.”

The CEA pointed out that urban consumption is increasingly shifting from listed to unlisted companies, indicating a lack of adequate data capture for service consumption.