Indian companies should not rely on a weak currency as a protective measure, but instead focus on productivity and investment in research and development, Chief Economic Advisor (CEA) V. Anantha Nageswaran said on Thursday, cautioning that the global economy has entered an era of de-globalisation.
Speaking at an event hosted by the Institute for Studies in Industrial Development, Nageswaran urged businesses to view currency devaluation as a complementary policy tool rather than a shortcut to export growth.
"A weak currency may boost exports in the short term, but it is not a replacement for efforts in productivity, R&D and quality improvements," he said.
India's merchandise exports grew 17.3% year-on-year in October to $39.2 billion, while imports rose 3.88% to $66.34 billion.
Nageswaran noted that merchandise exports, excluding oil and gems, have shown near double-digit growth of 9% during the first seven months of the fiscal year.
However, he warned against complacency. “The rising tide will not lift all boats. India’s export growth benefits when global trade volumes increase, but we are not yet competitive enough to seize market share through quality, cost efficiency or value for money,” he said.
Nageswaran emphasised that the world has shifted towards de-globalisation, with the ongoing war in Ukraine and geopolitical shifts altering trade dynamics. “The reliance on global GDP and export growth to drive India’s exports is no longer sustainable,” he said.
While a weak currency can make exports cheaper for global buyers, Nageswaran cautioned against using it as a crutch. “In
India and many other developing countries, weak exchange rates have been used to mask inefficiencies. This should not continue,” he said.
He pointed to China as an example, noting its focus on domestic productivity alongside currency strategies during its economic rise.
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