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Informist, Friday, Sept. 25, 2026

 

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--CEA: Not demand, but supply now main source of macroecon surprise 
--CONTEXT: CEA Nageswaran speaking at an event in Delhi 
--CEA: Rise in US bond yields to have impact on India's capital flows 
--CEA: India's unsettled relation with US to impact capital flows 
--CEA: State of energy mkt, lack of AI-play to impact India's capital flows

 

NEW DELHI – Unsettled relations with the US and the absence of an artifical intelligence-play pose near-term headwinds to foreign capital flows into India, Chief Economic Advisor V. Anantha Nageswaran said Friday. The state of the global energy market and rising US bond yields will also hurt capital inflows into India, he added.

 

"The unsettled relations with the US also influences capital flows, especially for the portfolio investors," Nageswaran said at an event here. "And the state of the energy market is uncertain."

 

His comments come on the backdrop of India-US trade deal negotiations that are going through many ebbs and flows. While both countries continue to negotiate a bilateral trade agreement, India is seeking preferential treatment over its Asian peers in the deal. A fresh spanner in the works is a US legislation proposing tariffs on buyers of Russian oil, giving US President Donald Trump the authority to impose tariffs of up to 100% on countries, including India, that purchase energy from Russia.

 

Nagerswaran flagged that not demand, but supply has become the main source of macroeconomic surprise for India. His comments come amid the ongoing war in West Asia, which is now in its seventh month and has caused havoc in the global energy supply chain. So far in 2026, foreign portfolio investors have pulled out nearly $18 billion from Indian markets on a net basis. 

 

He also highlighted that the jump in US bond yields will have a "huge impact" across borders, including India. The 10-year US Treasury yield has risen 40 basis points in September to 5.17% as of 1411 IST. The US Federal Reserve, which raised its policy rate for the first time in over three years earlier this month, is expected to further tighten policy. Concerns over high inflation and a slate of heavy government and private debt supply have also pushed up the 10-year US yield to its highest in over 19 years. 

 

"Apart from its (rise in US interest rates) impact on the private sector and external borrowing, suppose we were doing the FCNR(B) mobilisation now, we wouldn't have gotten what we got in the previous three months after this kind of interest rate increase," he said. "So, in a way it was a fortuitous case of timing that our mobilisation happened way before this massive spike in interest rates is beginning to unfold."

 

To boost foreign exchange inflows, the Reserve Bank of India had in June announced a swap window under which it would bear the hedging costs for banks raising three- to five-year foreign currency non-resident (bank) deposits. The window closed on Aug. 31 and attracted deposits worth $132.98 billion. 

 

Nageswaran also listed the medium-term challenges to India's goal of becoming a developed nation by 2047. He highlighted geopolitics, weaponisation of maritime chokepoints, and China's manufacturing scale as some of the main challenges.

 

"The manufacturing scale of China naturally poses a challenge for other countries to grow their manufacturing and employment as well, but it is inevitable that you have to invest in manufacturing because the world will not supply you," he said. Nageswaran also flagged climate variability's impact on agricultural production and productivity as a concern.  End

 

US$1 = INR 95.81

 

Reported by Pratiksha

Edited by Shubhayan Bhattacharya

 

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