In terms of the services sector, Nageswaran recommended a shift towards high-value added services to attract foreign demand and increase earnings. He stated, “The Indian economy needs to grow annually at 7-7.5% until 2030 in real terms… The manufacturing sector’s contribution to total gross value added must increase from the current 16% to at least 25% of GDP, at the expense of agriculture and low-value added services.”
Nageswaran further highlighted the need for the investment rate (gross fixed capital formation/GDP) to rise from 29% to at least 35%. He emphasized that the private sector, including foreign direct investment, should drive this increase as the government has limited fiscal space.
To achieve these goals, the CEA suggested key initiatives such as developing the domestic corporate bond market and providing targeted fiscal incentives to attract investment. Regarding government investments, he recommended focusing on infrastructure and public goods to stimulate private sector investment. Nageswaran also emphasized the importance of increasing net exports by creating a market for high-end manufacturing and high-value added services, and keeping inflation under control.
He stated, “The government must demonstrate fiscal prudence through austerity measures. Efforts should also be made to improve financial inclusion and literacy to enable individuals to understand and utilize financial instruments for savings and investment decisions.”