Trust, Deregulation and Reciprocation are key to avoid the middle-income trap: Chief Economic Advisor
“Trust, deregulation, and reciprocation are the cornerstones of avoiding the middle-income trap and achieving long-term economic prosperity” - Dr V. Anantha Nageswaran, Chief Economic Advisor (CEA) to the Government of India said at CII Annual Business Summit 2025 being held here today.
Addressing the session on ‘Being Competitive: The Policy Imperatives for India,’ Dr Nageswaran highlighted several unique challenges impacting India's economic growth. The labour-rich economy contrasts with the global capital-intensive growth model, complicating manufacturing and industrialization. Energy transition requires substantial investments, posing hurdles for capital-led growth. Steady growth in household incomes and savings is crucial, but AI and robotics threaten job stability. India's kinship-based societal structure hinders business scaling and contract enforcement, complicating economic progress.
The CEA emphasized India's top policy priorities for sustainable development and economic growth. Key areas include balancing energy affordability and security with energy transition through power sector reforms, addressing AI's impact on employment, ensuring fair income distribution, and focusing on education and skilling for the youth. Promoting manufacturing and SMEs, enhancing food security and agricultural productivity, encouraging private sector investment, and integrating economic growth with energy policies and external dynamics are also crucial for a resilient and competitive economy.
The CEA further stressed that the private sector's role in nation-building is crucial and necessitates a tripartite collaboration between the Government, Private Sector, and Academia. To achieve developed economy status by 2047, the private sector must be socially responsible, ensuring balanced deployment of capital and labour. This involves fair income distribution, workplace safety, investment in research and development, and attention to mental health, among other aspects.
On the macroeconomic front, the CEA emphasized that the IMF projects India to reach a USD 5 trillion economy by 2027-28. Achieving this milestone and avoiding the middle-income trap requires improving living standards. Trust, deregulation, and reciprocation from the private sector are pivotal for fostering sustainable growth and ensuring economic resilience.
The Session was also attended by Mr Sunil Mathur, Managing Director & Chief Executive Officer, Siemens Limited, India. Mr Mathur emphasized on the need of improving Regulatory frameworks in the country through adoption of best practices like Regulatory Impact Assessment (RIA) for new regulations.
The Session was moderated by Mr R Mukundan, Vice President, CII. Mr Mukundan highlighted the need for transformational reforms and outlined a multi-pronged agenda for enhancing India’s competitiveness covering issues such as adoption of a consultative approach to policy making as seen with the GST council, Investment in human capital along with physical infrastructure, improving the Female Labour force participation rate, significant increase in inhouse R&D spending, and moving toward sustainable growth.
The session saw enthusiastic participation by Industry members, academia and Think Tanks.
29 May 2025
New Delhi