Can India withstand extreme energy demand shocks? Shaktikanta Das responds

India is now better placed to withstand extreme energy demand shocks arising from global conflicts, Principal Secretary to the Prime Minister Shaktikanta Das said on Monday, while calling on Indian businesses to move away from overdependence on single-source supply chains and prioritise long-term resilience over short-term efficiency.

Addressing the CII Annual Business Summit, Das said India’s push towards renewable energy, infrastructure expansion and strategic trade partnerships has strengthened the economy’s ability to absorb external disruptions at a time of geopolitical uncertainty.

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“India is better positioned today to confront extreme (energy) demand conditions head-on and emerge resilient,” he said, referring to the impact of the ongoing conflict in West Asia on global energy markets.

Das said India Inc must undertake a “strategic reorientation” in response to an evolving global economic order marked by supply chain disruptions and geoeconomic fragmentation.

“It has now become necessary for the Indian industry and business to undertake strategic reorientation of their businesses, in today's world of geoeconomic fragmentation and supply chain disruption, the world of corner-solution is increasingly becoming less efficient,” Das said.

He explained that “corner solution” refers to excessive reliance on a single production source, narrow supply chains and just-in-time delivery systems.

From cost minimisation to resilience

Das said companies across the world had, over the years, optimised operations around efficiency and low-cost sourcing, but recent geopolitical conflicts had exposed the vulnerabilities of such models.

“No country or single supply chain remains the cheapest, safest or the most predictable on a sustained basis,” he said.

“Supply chains which the world believed are the cheapest, the safest and the quickest, today they are getting disrupted.”

“In this context, it is resilience maximisation which is increasingly replacing cost minimisation as a priority for corporates and businesses. Resilience maximisation can indeed be highly cost effective in the long run. Operational strategies of industry and businesses need to be reoriented from concentration to diversification and from short-term efficiency to long-term resilience,” Das said.

He also urged Indian exporters to reduce dependence on a limited set of markets and actively explore new geographies.

“Market diversification would spread the risks, stabilise revenue streams and allow firms to tap into new growth corridors and demand patterns,” he said.

According to Das, India’s growing diplomatic and economic footprint gives domestic firms an opportunity to expand into newer export destinations even as several major economies face slowing growth.

Also read: Energy shock strains India’s growth, fiscal outlook: S&P report

Infrastructure push and reform agenda

Das said the government had undertaken multiple measures to shield the economy from global volatility, including investments in renewable energy, large-scale infrastructure spending and free trade agreements with other countries.

“There is no reform complacency,” he said while speaking at a session titled “Journey to Viksit Bharat: The next Generation Reforms”.

He said India’s infrastructure expansion was being driven by a sharp rise in central government capital expenditure over recent years.

“Amidst global geopolitical and geoeconomic tensions, India offers a striking counter-narrative. New mega infrastructure projects are being delivered to the nation in quick succession,” Das said.

Calling the present environment a “world of unknown unknowns”, Das said businesses should focus on seven priorities: building organisational resilience, strengthening balance sheets, creating new supply chains, reskilling manpower, diversifying into new markets, investing for future readiness and increasing research and development spending.

“Policy consistency combined with timely and calibrated reforms are expected to ensure that India not only maintains macroeconomic stability but also emerges as a globally competitive and inclusive economy,” he said.

Das added that India was also taking “bold and forward-looking measures” to improve strategic self-reliance in sectors such as rare earth permanent magnets, critical minerals, shipbuilding, cotton productivity and artificial intelligence.

“There are several other initiatives which are in the pipeline and they will follow in the coming months and years to strengthen long-term resilience of our economy,” Das said.

(With inputs from PTI)