High tariffs on China create opportunities for India's manufacturing growth: CEA V Anantha Nageswaran

New Delhi: Global disruptions have created opportunities for emerging nations like India, and US tariffs on China could drive manufacturing shift to India due to lower duties, Chief Economic Advisor (CEA) V Anantha Nageswaran said on Saturday.

While there are worries about the first, second, and third round effects of the tariffs in terms of external demand to start with and the overall uncertainty and therefore implications for capital formation etc, there are some favourable outcomes also, he said at an event organised by Ashoka University here.

One of the positive impacts of the uncertain global environment is a reduction in crude oil prices which are now available around USD 60 per barrel. It is a windfall from India as it lowers input cost and also provides fiscal space, he said.

"China plus one, which was a different dimension earlier, now acquires a much higher sense of urgency for many other companies located inside China. So in some sense, you can call it a second wind (in favour of India)...we might see the progress much more than what we used to see in the last five years since Covid," he said.

States depending on their competitiveness can attract investments looking for destinations other than China, he said, adding there are 14 Indian states that have a per capita income which would classify them as middle-income countries with $4,500, per capita.

"There are 14 other states which are probably below that level. So, which kind of manufacturing strategy we pursue will depend on your per capita income level, some states can pursue labour-intensive manufacturing, some others can pursue capital-intensive manufacturing but there are going to be opportunities opening up for different states," he said.

Talking about economic growth, Nageswaran said India may have grown at 6.5 per cent during 2024-25 with exports getting better.

"In the context of where the world is, we are still doing quite all right at 6.5 per cent for FY'25. We were in good shape at the end of FY'25 and I still don't think we need to be pessimistic about export outcomes...China plus one has opened up (opportunities)," he said.

Even in the first quarter of FY'26 high frequency data are indicating that this momentum is currently being maintained, he added.

Nageswaran said that people tend to equate economic reforms with governments, but it has two or three sides to the story.

It is not just the government getting out of the way but the private sector also has to reciprocate as there is a partnership with them, he said.

"Government, private sector, the judiciary, media and the so-called non-for-profit or civilian sector, all of them in some sense influence the trajectory, but the degree and the magnitude and the persistence of reforms, sometimes for the right reasons, and sometimes for the wrong reasons," he said.

He highlighted top priority areas which include energy affordability and energy transition; employment generation and artificial intelligence; share of income accruing to capital and labour owners, education & skilling, rise of manufacturing and SME, food security and private sector capital formation.