Infrastructure Spending Began Increasing From 2018-19, He

India's ability to sustain high economic growth while reducing public debt and fiscal deficit reflects a significant improvement in the economy's supply-side potential, even as the country faces a more challenging global environment over the next two decades, Chief Economic Adviser V Anantha Nageswaran said. Speaking at an Assocham FinTech event in New Delhi, Nageswaran said the Indian economy had shown resilience despite facing major external shocks over the past decade, including the Covid-19 pandemic, the Russia-Ukraine war, the energy shock, supply chain disruptions, tariffs and geopolitical conflicts. He noted the government inherited an economy facing balance-sheet stress in corporate and banking sectors, along with high fiscal and current account deficits, and subsequent years focused on repairing these balance sheets while undertaking structural reforms such as the Goods and Services Tax and the Insolvency and Bankruptcy Code.

Infrastructure spending began increasing from 2018-19, he said. However, the economy faced problems in housing finance and non-banking finance in 2018-19 and 2019-20, followed by Covid-19, the Russia-Ukraine war and the energy shock. "Every year or two, there has been some major exogenous shock, Nageswaran said.

Despite these disruptions, India has been among the few economies to sustain real growth of around 7 per cent in the post-Covid period. He cited the decline in fiscal deficit from 9.2 per cent to 4.4 per cent, noting India was among a small number of countries that reduced their public debt ratio during the post-Covid period. The CEA said sustained growth had been accompanied by a decline in average inflation, with India's inflation rate converging towards the developed-world average of around 3-4 per cent.

He said the focus over the next two decades should be on harnessing India's demographic dividend through skilling, education, and greater attention to physical and mental health, identifying agriculture and state capacity as areas requiring greater attention. On the financial sector, Nageswaran said finance should be viewed as an enabling sector rather than the key driver of economic activity, and fintech companies can make a difference in sectors such as small and medium enterprises, self-employed businesses and retail finance. He cautioned against making financial-sector activity a multiple of gross domestic product a policy objective, warning that excessive financialisation could give the financial sector greater importance than the real economy.

"We just have to make sure that the regulatory environment is predictable, stable, consistent, and doesn't stand in the way of legitimate economic activity and financial sector growth, he said. On cross-border payments, he said growth in trade would drive greater use of respective currencies and payment systems, with policymakers focusing on regulatory and technological frameworks. On artificial intelligence, Nageswaran said the focus should be on safety and security, particularly in the financial sector, cautioning that AI should not become a tool for exclusion and humans should remain in the loop.

He said the next 20 years would not resemble the previous three decades since the 1991 economic reforms. "We are going through structural breaks in many areas — climate, technology and geopolitics and supply chain weaponisation, he said, adding that both private and public sectors would need to "up our game substantially as the global economic environment becomes more challenging.