Synopsis : India can sustain strong economic growth of up to 7.5% even with a 30% savings rate, provided capital efficiency improves and investment costs fall, said Chief Economic Advisor V Anantha Nageswaran. Structural reforms, quality spending, and better productivity—not just higher investment—are key to achieving Viksit Bharat goals.
India’s ambitious growth trajectory remains achievable without a dramatic rise in savings, according to Chief Economic Advisor V Anantha Nageswaran. Speaking on Friday, he said the economy can grow at around 7.5% in real terms with a 30% savings rate, as long as policy reforms continue to improve capital efficiency and reduce investment costs.
Addressing questions on how India can meet its long-term “Viksit Bharat” aspirations with a relatively modest savings rate, Nageswaran stressed that efficient use of capital matters more than the sheer volume of investment. Lowering the Incremental Capital Output Ratio (ICOR) through reforms in infrastructure, deregulation, ease of doing business, and process simplification will be critical.
While praising the strong performance of India’s services sector, the CEA acknowledged that manufacturing still needs focused attention. To attract global value chains, he highlighted the importance of stable tax policies, simpler regulatory processes, improved logistics, last-mile connectivity, affordable power, easier access to land, smoother approvals, and a robust talent ecosystem.
On fiscal policy, Nageswaran said the Centre is not recommending any fixed percentage of GDP for states to spend on growth-supporting measures. Instead, he emphasised that quality of expenditure matters more than quantity, especially as states already operate within fiscal deficit and debt limits.
He also cautioned against unintended consequences of unconditional cash transfers, noting their potential impact on labour availability. On the rupee’s depreciation despite low domestic inflation, Nageswaran explained that as a capital-importing economy, India’s currency is sensitive to global capital flows.
Addressing concerns over weak net FDI inflows, the CEA clarified that gross FDI into India is actually rising, with softer net figures reflecting global uncertainty, profit repatriation, and higher outward investments by Indian firms. He expressed confidence that India’s long-term attractiveness remains strong.
On education and health spending, Nageswaran argued that outcomes should matter more than headline spending ratios, stressing that efficiency, better teaching methods, nutritious meals, and engaging curricula are crucial to reducing dropout rates and improving learning outcomes.
Disclaimer : This article is for informational purposes only and reflects statements and views expressed in public interviews. It does not constitute financial, investment, or policy advice. Readers should rely on official data and expert consultation for decision-making.
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