India must boost manufacturing, FDI and AI-ready jobs to become developed nation: CEA Nageswaran

India must strengthen its manufacturing capabilities, attract foreign investment and create jobs suited to an artificial intelligence-driven economy as it seeks to become a developed nation by 2047, Chief Economic Adviser V Anantha Nageswaran said.

Speaking at the 13th SBI Banking & Economics Conclave 2026, Nageswaran said India's development transition was unfolding against a backdrop of geopolitical tensions, the weaponisation of supply chains, climate variability and growing competition from China's manufacturing capabilities.

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"We have to reimagine and be prepared to reinvent many of the ways in which we operate, whether you are in the private or the public sector," he said, emphasising the need to build economic resilience while sustaining growth.

Nageswaran said manufacturing would be central to diversifying India's growth and strengthening its economic resilience and security. India, he said, could not afford to choose between manufacturing and services and would need to develop both sectors simultaneously.

He pointed to India's goods trade deficit, which remains at around 3.5-4% of GDP even after excluding oil and gold, as a reason to deepen domestic manufacturing. However, he cautioned that indigenisation should go hand in hand with export competitiveness rather than focus solely on replacing imports with domestic production.

FDI, supply chains

India must strengthen policies at both the state and national levels to attract foreign investment amid intensifying competition from developed economies, Nageswaran said. Key priorities include tax certainty and simplicity, investor protection and access to a skilled workforce.

He also called for building buffers in critical commodities and developing domestic capabilities in smaller but strategically important components that could emerge as choke points in global supply chains.

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The CEA said India would need to build resilience not just through large-scale industrial capacity but also by identifying vulnerabilities in supply chains and preparing for disruptions.

AI and the jobs challenge

On artificial intelligence, Nageswaran said India should look beyond the development of frontier AI systems and focus on how the technology could reshape employment.

Citing recent research covering 41 countries, he said the evidence so far indicated that while junior workers were being affected, overall employment and employment among senior workers had increased.

For India, however, a slowdown in the creation of entry-level jobs could widen inequality and generate longer-term social risks, particularly given the country's demographic dividend, he said.

Nageswaran called for a focus on both AI-enabled and AI-insulated jobs, particularly in labour-intensive manufacturing and services such as hospitality, tourism and elder care. He also stressed the need to make trade skills more attractive and increase private-sector participation in curriculum development.

Growth remains resilient

Nageswaran said India's growth momentum remained resilient, with the economy expanding 7.8%. He attributed the sustained growth of 7% or above to reforms and progress in areas including digital public infrastructure, financial inclusion, capital expenditure and formalisation.

He said India would need to combine these gains with stronger manufacturing capabilities, investment and employment opportunities to support its long-term development ambitions.