Chief economic adviser V Anantha Nageswaran has flagged three near term headwinds for India’s growth story: unsettled relations with the US, volatile energy prices and the absence of an artificial intelligence (AI) play in the country, weighing down the country’s economic momentum.Earlier, speaking at the State Bank of India’s Banking and Economics Conclave in Mumbai on Thursday, Nageswaran described India-US relations as being in an “uneasy equilibrium” as trade-related differences between the two countries persist.At the 13th SBI Banking & Economics Conclave 2026, Nageswaran said that India’s economic growth has remained resilient, even as the country’s development journey unfolds against a global backdrop marked by geopolitical tensions, the weaponisation of supply chains, climate variability and competition from China’s manufacturing capabilities.“We have to reimagine and be prepared to reinvent many of the ways in which we operate, whether you are in the private or the public sector,” he added.Nageswaran said India would need to strengthen its manufacturing capabilities, attract foreign investment and create employment suited to an AI-driven economy as it works towards becoming a developed nation by 2047.Manufacturing, he said, has a role beyond simply diversifying economic growth. It is also important for building resilience and strengthening economic security. India therefore cannot choose between manufacturing and services and needs to pursue both, he said.One of the factors highlighting the need to strengthen domestic manufacturing is India’s goods trade deficit. Nageswaran said the deficit remains around 3.5-4 per cent of GDP even after excluding oil and gold.At the same time, he said indigenisation cannot be limited to replacing imports with domestic production. Building manufacturing capabilities would also need to be accompanied by export competitiveness.Foreign investment is another area where Nageswaran said India needs to strengthen its approach. As developed economies compete to attract capital, India needs stronger policies at both the state and national levels.He identified tax certainty and simplicity, investor protection and the availability of a skilled workforce as areas that would be important in attracting foreign investment.Nageswaran also highlighted the importance of preparing for vulnerabilities in global supply chains. India, he said, should build buffers in critical commodities and develop capabilities in smaller but strategically important components that could become choke points in global supply chains.The CEA also flagged the employment impact of AI as an area requiring attention. He said India’s approach should go beyond frontier AI development and focus on how the technology could affect jobs.Nageswaran added that India should work towards creating both AI-enabled and AI-insulated jobs. Labour-intensive manufacturing could provide employment opportunities, while services such as hospitality, tourism and elder care could also play a role.Despite the headwinds, Nageswaran said India’s growth momentum remained resilient. The economy has grown 7.8 per cent, while reforms in digital public infrastructure, inclusion, capital expenditure and formalisation have contributed to sustained growth of 7 per cent or above.
