India Needs Strategic Hedging Amid US Trade Challenges, AI Headwinds: CEA V Anantha Nageswaran

Chief Economic Advisor V Anantha Nageswaran has flagged three near-term challenges for India: unsettled ties with the US, uncertainty in energy markets and what he described as the absence of the “so-called” artificial intelligence play in the country.

Speaking at an event, Nageswaran said strained relations with Washington could affect capital inflows, particularly from portfolio investors. He also pointed to tariffs, sanctions and trade restrictions as part of “sustained coercion for countries to choose between the blocs”.

India needs strategic hedging

The comments come amid uncertainty over a US law that allows President Donald Trump to impose tariffs of up to 100% on countries purchasing Russian energy. India and the US are also continuing negotiations on a bilateral trade agreement.

“Given India’s location, size, and geography, India cannot afford to choose. The answer is therefore hedging… and hedging will have significant cost. And that has to be factored in in our decision-making, both in the public and the private sector,” Nageswaran said.

He warned that higher bond yields in advanced economies could make emerging markets less attractive to investors, creating pressure on capital mobilisation. The narrowing difference between US and Indian bond yields could also reduce the incentive for investors who continue to seek a premium.

Energy and AI remain concerns

Nageswaran cautioned that policy reforms may not immediately produce visible results in a difficult global environment.

“You can do everything right, but the public will see that there is no result and therefore keep clamouring for more,” he said.

He also said trade restrictions were increasingly being used beyond the US, citing export licensing and supply-chain bottlenecks involving China and the European Union.

On energy, Nageswaran said India's challenges involved more than crude prices, with availability, freight and insurance costs also important factors. Higher prices for copper, silver and polysilicon, he added, could increase the cost of India's transition towards renewable energy.