India on Track to Become $5 Trillion Economy by 2027-28: Chief Economic Advisor

India is poised to become a USD 5 trillion economy by 2027-28, said Chief Economic Advisor (CEA) V Anantha Nageswaran on Thursday. Despite facing complex geopolitical challenges, India is strategically positioned to capitalize on shifting global trade dynamics, according to the CEA.

While geopolitical headwinds persist, certain Indian sectors are expected to benefit from the ongoing US tariff policies, creating fresh opportunities for businesses. The CEA highlighted the need for India to overcome five critical structural handicaps on its journey toward developed country status by 2047.

Structural Challenges

One major challenge is India’s mismatch between its labour-abundant economy and the global capital-intensive growth model, which limits employment generation. Additionally, the energy transition presents a “double whammy” for capital-led growth, requiring cheap power alongside costly backup energy solutions.

The CEA emphasized that meeting India’s capital needs depends heavily on steady growth in household savings and income. This domestic resource mobilisation is vital for financing sustained economic expansion.

Private Sector’s Role in India’s Growth

Strong private-public partnerships are essential for India to meet its growth aspirations. Nageswaran called for a fairer distribution of incomes, balanced capital and labour deployment, improved workplace culture, mental health initiatives, and increased private-sector investment in research and development. He pointed out a concerning gap between private sector profitability growth and capital formation that needs urgent attention.

AI and Labour Market Vulnerabilities

Addressing technological advancements, the CEA warned that AI and robotics primarily threaten service sector jobs, a key area of India’s competitive advantage. He stressed that adopting super-intelligent AI is a business decision that must balance innovation with labour protection.

India’s dependence on other countries for critical minerals was identified as a strategic vulnerability. Moreover, lifestyle changes such as increased consumption of ultra-processed foods and screen time could undermine India’s demographic dividend, which is central to its economic growth potential.

Low Trust Level

Nageswaran also discussed India’s low societal trust levels, noting that strong internal community trust contrasts with weak external trust. This trust deficit contributes to regulatory overreach affecting government-private sector relations.

Despite these challenges, the CEA remained optimistic about India’s growth prospects. He warned the private sector not to expect a steep rupee depreciation similar to the past 30 years, suggesting a more stable currency environment ahead. Looking ahead, the CEA forecasted a significant realignment of global trade patterns, with supply chain security taking precedence over efficiency. He predicted the world will split into at least two major trade blocs in the coming decade.

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