'Sustaining high growth gets harder as the base expands'

The '47 target of India becoming developed banks on nominal growth and exchange rates, says CEA V A Nageswaran at the 30th edition of Delhi Dialogues

- 

N a wide-ranging interaction at Delhi Dialogues, Chief Economic Adviser V Anantha Nageswaran challenges prevailing narratives on rural distress, private investment, inequality and data credibility, arguing that India's policy choices must be judged against global realities rather than static benchmarks. Excerpts:

Santwana Bhattacharya: There is a perception of rural economic stress and a call for a major course correction in economic policy. How do you assess the rural economy and the need for policy shifts?

I must challenge the premise. The rural distress narrative has reversed post-Covid. Earlier, a K-shaped recovery was used to describe a booming urban economy and a lagging rural one. Today, the same K is invoked to argue that rural India is strong and urban India is weak.

The data does not support a stress narrative. Rural real wages are growing positively and accelerating. We see this reflected in strong rural sales of two-wheelers, four-wheelers and tractors.

As for course correction, we must recognise the significant policy actions already taken. Less than a year ago, substantial direct tax relief was provided. More recently, major indirect tax relief was announced. The RBI has cut policy rates by 100 basis points and introduced liquidity measures. Since the elections, the government has launched employment-linked incentive schemes, apprenticeships and skilling missions.

Household savings are another important indicator. When savings fell below 5 percent of GDP, there was concern. This rose to 5.3% in 2023-24 and, according to the RBI, reached 6% in 2024-25. Financial liabilities have declined while financial assets have increased. In a country as large as India, anecdotes can always be found to support any belief, but the macro data does not point to distress requiring an emergency course correction.