The Chief Economic Advisor (CEA) of the Indian government, V. Anandha Nageswaran, stated that India cannot afford to choose between global blocs and emphasized the need to form strategic reserves and establish partnerships with foreign technology companies.
At an event organized by the Public Affairs Forum of India (PAFI) on Friday, Nageswaran outlined three short-term obstacles for India: uncertainty in relations with the United States, energy market instability, and the lack of so-called artificial intelligence (AI) development in India.
Unresolved relations with the US could negatively affect capital inflow into India, especially from portfolio investors. More broadly, he characterized US tariffs, sanctions legislation, and trade restrictions as part of 'the ongoing coercion of countries to choose between blocs.'
Nageswaran's comments came against the backdrop of the US Congress passing a law allowing President Donald Trump to impose tariffs of up to 100% on India's energy imports from Russia. Although the US Congress passed the Lindsey O. Graham Sanctions Against Russia Act of 2026 last week, the final decision on imposing tariffs, as well as their rate and scope, remains with Trump.
In parallel, India is negotiating a trade agreement with the US, the terms of which, according to Union Minister of Commerce Piyush Goyal, are 'almost ready.' New Delhi expects Washington to develop a mechanism that gives India a tariff advantage over other competing economies. Goyal has repeatedly confirmed this position, including on Thursday.
Nageswaran noted that given India's geographical location, size, and characteristics, the country cannot afford to make a choice; therefore, the answer lies in hedging, which will involve significant costs that must be considered by both the public and private sectors.
Furthermore, the CEA reported that rising bond yields in developed countries will reduce investor willingness to direct capital to emerging markets, leading to temporary pressure on capital mobilization. He added that narrowing the gap between US and Indian bond yields, while positive, might deter investors, as they still expect a premium of 200–300 basis points. Markets will need time to realize that the debt of rich countries has become riskier.
Nageswaran cautioned that even investor-friendly reforms may not show quick results in the current environment. He advised critics to consider the changing global context before judging policy, noting that 'one can do everything right, but the public will see that there are no results and will continue to demand more.'
He also pointed out that trade has been used as a weapon far beyond the US, citing export licensing, supply chain bottlenecks, and similar moves by China and the European Union as examples.
Additionally, Nageswaran noted that raw oil issues concern not only prices but also availability, as well as freight and insurance costs. The rising cost of copper, silver, and poly-silicon will also make the transition to renewable energy sources more expensive.
Highlighting that India imports 90 to 97 percent of its copper concentrate, he stated that to provide some insurance against a global failure, 'it is necessary to have strategic reserves for six to nine months.' He specified that such buffers require 'financial resources.'
Regarding technology, Nageswaran believes that India does not need to produce the most complex products. Instead, it needs to identify the most indispensable ones and be prepared to manufacture them globally. He drew attention to small companies in Japan, Germany, and Western Europe whose products are critical to the semiconductor and AI ecosystem, many of which are struggling due to a lack of visible successors. He recommended either acquiring these companies, obtaining a stake in their intellectual property (IP), entering into technology transfer agreements—organically or inorganically—or collaborating with them.
The CEA suggested: 'If we do not apply to become part of their ecosystem, they will fall into the hands of companies that will deplete them, take the IP, and sell the rest. And we will miss the opportunity.'
He stated that investment in production is inevitable because 'the world will not provide it,' despite China's scale. Since imports will continue to grow with growth, India will have to export more and attract foreign direct investment much better than before, alongside efforts to increase domestic production.
Nageswaran also warned that India cannot rely on its demographic dividend. Pressure on the mental and physical health of youth, along with changing skill requirements, means that the annual increase of 1.5–2 percentage points typically brought by demographics 'cannot be taken for granted.'
Concerning AI, he explained that he intentionally used the phrase 'so-called.' He acknowledged that India was mentioned for innovative approaches to AI regulation and agreed that India's intellectual property 'has not yet reached the required level,' but he is confident that 'it will come.' He added that Indian work in peripheral AI applications could look completely different 'in 12 months.'
