Global economic order under structural strain; India must prepare for prolonged geopolitical fragmentation: CEA

India’s Chief Economic Advisor V Anantha Nageswaran warned Tuesday that the global economic system is undergoing a structural transformation, moving beyond temporary disruptions. Speaking at the CII Annual Business Summit, he described an era where comparative advantage, free capital flows, and multilateralism are no longer guaranteed. The West Asia conflict has intensified risks for India, acting as a ‘live balance-of-payments stress test’ with direct impacts on inflation, the current account deficit, and the rupee. Nageswaran identified four key shifts reshaping the global economy: geo-economic fragmentation, technology bifurcation, energy transition policies, and permanent repricing of geopolitical risk. Supply chains are being rebuilt for resilience rather than efficiency, while technology ecosystems split along geopolitical lines. He noted that emerging economies can no longer assume neutrality, as technology partnerships now carry geopolitical weight. India’s vulnerabilities are acute: 87% of its crude oil imports, 60% of LPG imports, and 38% of annual remittances are tied to Gulf nations, with freight rates and energy prices surging. These trends signal lasting disruption, not a temporary shock. Nageswaran cautioned that advanced economies may not support India’s rise without resistance, urging New Delhi to deepen economic diversification and self-reliance. In the last five years, India has signed nine trade agreements, including with the UK, EU, Australia, and EFTA, marking its most aggressive trade diplomacy push. However, he stressed that agreements only create value upon implementation, calling for faster regulatory and procedural integration. The focus must shift from signing deals to enforcing them to reduce dependence on any single economic corridor.