Rupee Won’t Face Continuous Pressure: CEA Nageswaran

Chief Economic Adviser V Anantha Nageswaran stated that the rupee is unlikely to remain under continuous pressure in the coming years. He noted that the currency’s competitive real effective exchange rate has contributed significantly to net export growth.

Export Momentum and Manufacturing

India’s trade agreements will provide further momentum to exports and create employment opportunities in export-oriented sectors according to Nageswaran. He highlighted progress in electronics manufacturing and smartphones as key beneficiaries of shifting global supply chains away from China, saying the country had gained significantly from this shift.

Key focus areas mentioned by the CEA include:

• Building resilience rather than pursuing self-reliance in isolation with the goal of diversified abundance.
• Identifying areas of fragility and focusing resources toward building capabilities in strategically important sectors rather than for prestige.
• Strengthening small and medium enterprises and manufacturing capabilities critical to global supply chains to lead to the eventual goal of becoming strategically indispensable to the rest of the world by 2047.

Global Headwinds and Economic Challenges

Near-term headwinds for the Indian economy include lingering global uncertainties and specific macroeconomic factors. Nageswaran outlined several challenges confronting the financial landscape.

Identified near-term headwinds consist of:

• An unsettled relationship with the United States.
• The state of the energy market.
• The absence of a so-called AI play, which is currently the dominant discourse among investors’ minds overseas.

On the balance of payments, Nageswaran stated it is something that will remain a challenge not just episodically but almost continuously. He suggested building buffers in private and government sectors for key commodities, including oil, for at least six months. Rising imports and capital competition driven by higher interest rates in developed countries underscore that the steps taken by the RBI this year were an act of foresight.