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Informist, Saturday, May 2, 2026

 

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--CEA Nageswaran: Utilisation of FTAs by Indian companies 'very poor
--CONTEXT: CEA Nageswaran speaking at Isaac Centre for Public Policy event
--CEA Nageswaran: Should be relatively expensive to import from China now     
--CEA Nageswaran: Rupee's REER compared to China has come down meaningfully
--CEA Nageswaran: Cos need to reflect on why manufacturing has not picked up 
--CEA Nageswaran:Expect IT cos to realise that AI-related fear is overstated
--CEA Nageswaran: May end FY26 with gross FDI of $90 bln-$95 bln
--CEA Nageswaran: Capital inflows imperative for tax policy certainty

 

NEW DELHI – The Indian rupee's real effective exchange rate relative to China has come down meaningfully, supporting the country's export competitiveness, Chief Economic Adviser V. Anantha Nageswaran said Saturday. Thus, it should be relatively expensive to import from China and relatively inexpensive to export, everything else being equal, he added. 

 

"...Indian rupee's real effective exchange rate, which used to be fairly widely undervalued relative to China, over the years has now finally come down meaningfully enough and Chinese REER, Yuan REER as well has begun to rise and the gap has closed," he said while speaking at the Isaac Centre for Public Policy event in New Delhi.

 

The rupee's real effective exchange rate, based on a basket of 40 currencies in terms of trade-based weights, fell for the fourth consecutive month in March. The rupee's real effective exchange rate index was at 92.72 in March, down from 93.99 in February. The print indicates the Indian currency is undervalued by almost 8%.

 

Nageswaran said that, at the margin, the regulatory environment has only gotten better for investors and India's export competitiveness over China should be a good reason to invest in India.

 

In terms of inflows, Nagewaran expects 2025-26 (Apr-Mar) to end with a gross foreign direct investment print of close to about $90 billion-$95 billion. This, he said, is an important sign that investors have not given up investing in India or viewing India as an investment destination. He is hopeful India will see improvement in the gross FDI numbers in FY27. Capital inflows are imperative for tax policy certainty in the country, he added. 

 

He expects India's current account deficit to widen from less than 1% of GDP to anywhere near 2% to over 2% of GDP in FY27. "And that means we have to make ourselves always attractive for investment in both domestic and foreign. And that is something we need to do in order to also attain future strategic leverage," he said. India's current account deficit was $13.2 billion, or 1.3% of GDP in the December quarter. 

 

Nageswaran further said one of the problems with India is that utilisation of free trade agreements by domestic companies is very poor compared to other countries. "So, the industry associations and bodies have to do a much better job of talking about them (FTAs)," he said.

 

The chief economic adviser also urged the corporate sector to reflect on why it has not picked up on manufacturing progress. "...post-COVID Indian companies' profits grew at 30.8% (per) annum, if you look at BSE 500 or NSE 500 companies. But still our overall capital formation rates from the private sector have been disappointing," he said.

 

Talking about the impact of artificial intelligence on the information technology sector, Nageswaran said that companies may lay off people in the short run, but over time they will realise that they may have gone too far and there will be a recalibration. "So, if you take a five-year view, then we may find that much of the fear (of AI) may have been overstated. But these are early days. The fear dominates right now," he said. End

 

US$1 = INR 94.91

 

Reported by Pratiksha and Sagar Sen

Edited by Tanima Banerjee

 

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