‘2026 resembles 1991’: Why CEA V Anantha Nageswaran wants India to rethink its growth strategy — what he said

Chief Economic Adviser V Anantha Nageswaran has called for a rethink of India's growth strategy, saying geopolitical tensions, supply-chain disruptions and structural weaknesses in manufacturing, energy, agriculture and technology have increased the pressure on the country to strengthen its economic resilience.Comparing the economic moment with the turning point of 1991, he said 2026 could prove to be an inflection point for the country, requiring a reassessment of its approach to manufacturing, energy, agriculture and technology.Speaking at the ISID-IDRA national conference on Thursday, October 29, Nageswaran said the comparison with 1991 should not be interpreted as a prediction of another balance-of-payments crisis.

Instead, he described the current global environment as a crossroads in India's development journey, calling for changes to the way the country builds economic strength.“Basically, 2026 resembles 1991,” he said, while clarifying that the two situations were not identical.What is triggering the call for a rethink?Nageswaran said the immediate concern was a changing global economic order in which countries are increasingly using control over critical supplies and technology as instruments of geopolitical influence.Citing China's recent announcement of an export licensing regime for tunnel-boring machines and other infrastructure-related products, he pointed to India's vulnerability when access to essential equipment depends on decisions taken abroad."Just as last week, we saw China announcing an export licensing regime for tunnel boring machines and for many other products of infrastructure goods, which India will be needing," PTI quoted him as saying.Nageswaran said building manufacturing resilience would require India to reduce its dependence on imported critical inputs, including crude oil, industrial metals, fertilisers, active pharmaceutical ingredients (APIs), rare earths, critical minerals and battery chemicals.He also flagged India's vulnerability to disruptions in supplies of natural gas and cooking gas, saying the recent global shocks had underlined the need to build resilience across several essential commodities.Listing the disruptions confronting the economy over the past six years, Nageswaran referred to the Covid-19 pandemic, the Russia-Ukraine war, semiconductor shortages, the weaponisation of critical raw materials and minerals, US tariffs and the conflict in West Asia.He warned that the next two to three decades could look very different from the four decades before the pandemic, when global supply chains were largely shaped by efficiency and relatively predictable access to resources.“The more countries weaponise their supplies, they become less effective over time.

But there is a period when they are binding, because other countries cannot ramp up production just like that,” he said.Why is 2026 being compared with 1991?India's 1991 economic crisis was marked by a severe balance-of-payments problem that pushed the country towards sweeping economic reforms, including liberalisation. Nageswaran's comparison, however, was about the significance of the moment rather than the nature of the crisis.He said the 1991 crisis brought decades of accumulated constraints to a head and forced a major change in economic policy.

The current situation, he mentioned, is creating a similar need to reassess India's growth strategy, as external disruptions combine with weaknesses within the economy.Nageswaran identified structural constraints in manufacturing, energy, agriculture and technology as additional pressures on India's ability to withstand global shocks.What changes does the CEA want India to make?Nageswaran called for India to pursue three objectives together: import substitution, strategic resilience and strategic indispensability.

He mentioned this would require the country to produce more critical goods domestically, build safeguards against supply disruptions and develop capabilities that make India an important part of global supply chains.He cautioned that simply increasing manufacturing's share in gross domestic product would not be enough. In his view, industries receiving policy support should also demonstrate that they can compete in export markets or match imported products on price.“Now the challenge for India is to do all three simultaneously because the window of time is short and import substitution has to be done,” he stated, according to Business Standard.He also called for building strategic buffers of essential commodities, diversifying sources of imported inputs and reducing costs such as energy and land, which affect manufacturers' competitiveness.

Nageswaran said fiscal support should be directed towards production and productivity, with clear objectives and timelines.Why could economic policymaking become more difficult?Nageswaran said the shift towards supply-side resilience also has implications for economic policymaking. He argued that monetary and fiscal tools that helped address earlier demand-led crises may be less effective when the problem is a shortage of essential goods or disrupted supplies.When demand is weak, governments and central banks can use spending and lower interest rates to stimulate activity.

However, when supply is constrained, increasing demand does not necessarily create more energy, minerals or industrial inputs.He warned that monetary policy could become more difficult to execute over the next 20 to 30 years as supply shortages disrupt both output and inflation.(With inputs from agencies)