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    COVER STORY                                                               MAY 29, 2026     |  The Indian Eye                    5

            per cent in fiscal 2026. The problem                                                                      Berlia  specifically  highlighted
            is not just fuel prices themselves, but                                                               India’s technological and human re-
            the cascading effect across transport,                                                                source strengths. “We can at least
            manufacturing and consumer goods.                                                                     help them to have access to the kind
                Mehrotra criticized the recent                                                                    of manpower that we can provide to
            diesel price hike, arguing that trans-                                                                them, which is both skilled as well as
            port costs inevitably get passed on to                                                                technologically advanced,” she said.
            consumers. “Diesel is an input into                                                                       This focus on capabilities con-
            transportation costs,” he said. “That                                                                 nects directly with the structural
            will finally get passed on to the con-                                                                reforms proposed by former NITI
            sumer.”                                                                                               Aayog member Arvind Virmani.
                The weakening rupee is worsen-                                                                        Virmani argued that headline
            ing the inflation cycle. According to                                                                 GDP  growth  alone  is  insufficient
            Mehrotra, the currency has depreci-                                                                   unless it produces broad-based im-
            ated from below Rs 90 to nearly Rs                                                                    provements in productivity and wel-
            96 per dollar within three months. A   A Marshall Islands-flagged tanker Symi, carrying approx 20,000 tonnes of LPG, arrives at the   fare. He identified three critical areas
            weaker  rupee  makes imports  more                                                                    requiring reform: education, job skill-
            expensive, further intensifying infla-  Kandla Port, in Kutch. Symi crossed the Strait of Hormuz on May 13 (DPA Kandla/ANI Video Grab)  ing and public health infrastructure.
            tionary pressures.                                                                                        His warning on education was
                India’s external finances are also   ty. ASSOCHAM National Council   into global supply chains. Instead of  stark. “Roughly 50 per cent of chil-
            under severe strain. Sinha noted that   Chairperson Sushma Paul Berlia ar-  retreating during uncertainty, she  dren  cannot  read  a  basic  text  even
            India’s  forex  reserves  have  already   gued that global turbulence may ac-  urged firms “not to stop growing but  after completing primary school,” he
            fallen by USD 27-28 billion since the   tually make India more attractive to   rather to start investing and invite in-  said, criticizing India’s obsession with
            conflict began. Foreign Institutional   investors seeking stability.  vestment.”                      certificates rather than actual learn-
            Investors pulled out nearly USD 20    “Many countries around the        Her  argument  reflects  a  larger  ing outcomes.
            billion in March and April alone,   world are going through greater pain   global trend. As geopolitical conflicts   Similarly, he argued that India’s
            while net Foreign Direct Investment   and they may still be looking at In-  reshape trade networks, countries  vocational  training  system  remains
            dropped sharply.                  dia,” she said.                   are searching for reliable manufac-  grossly inadequate. Only 2 per cent of
                But despite these pressures,      Berlia believes Indian compa-  turing and service partners. India’s  students are in vocational education,
            economists argue that India still pos-  nies and MSMEs should use the   skilled workforce and large market  far below what India’s income level
            sesses important shock absorbers.  moment to forge international part-  position it as a possible beneficiary of  requires.
                The most immediate buffer is   nerships and integrate more deeply   this transition.                  “We are not giving them the job
            the Reserve Bank of India’s expected                                                                  skills which will raise their real in-
            dividend transfer of Rs 2.8-3 trillion                                                                come,” Virmani said. “Higher real
            to the government. Sinha called it a                                                                  wages come from higher productivity.”
            “major  savior”  for  the  fiscal  deficit                                                                Virmani  also  linked  economic
            at a time when subsidy burdens are                                                                    resilience to public health and sanita-
            rising and tax revenues may weaken                                                                    tion systems. Clean drainage, sewage
            due to slower industrial growth.                                                                      networks, roads and urban infrastruc-
                This  financial  cushion  matters                                                                 ture are not merely welfare issues;
            because the government faces grow-                                                                    they are productivity issues central to
            ing  fiscal  pressure  from  fertilizer                                                               long-term growth.
            subsidies, fuel support measures and                                                                      Together, these arguments sug-
            revenue losses caused by excise duty                                                                  gest that India’s way out of the Iran-
            cuts on fuel. Economists estimate                                                                     war-induced crisis cannot rely solely
            the  domestic  cost  of  the  conflict  at                                                            on  emergency  fiscal  measures  or
            roughly 0.5 per cent of GDP.                                                                          central bank interventions. The real
                The second buffer is India’s for-                                                                 escape route lies in reducing struc-
            eign  exchange  reserves.  Although                                                                   tural dependence on volatile imports,
            reserves have declined, economists                                                                    building  domestic  productivity  and
            argue that they were built precisely                                                                  strengthening economic capabilities.
            for moments like this. Radhika Rao                                                                        The  Iran  war  has  exposed  the
            of DBS Bank described the RBI’s                                                                       fragility of a growth model still deep-
            intervention strategy as the intended                                                                 ly tied to imported energy and exter-
            use of a “rainy day” reserve accumu-                                                                  nal shocks. But it has also created an
            lation.                                                                                               opening. If India can combine short-
                “The substantial reserve accu-                                                                    term stabilization with long-term re-
            mulation in recent years was intend-                                                                  forms in manufacturing, skills, infra-
            ed precisely to strengthen buffers for                                                                structure and investment climate, the
            periods of volatility such as the cur-                                                                crisis may ultimately accelerate the
            rent environment,” Rao said.                                                                          country’s  economic  transformation
                Yet temporary buffers alone                                                                       rather than derail it.
            cannot resolve a structural crisis. The                                                                   The challenge is that such trans-
            deeper debate now is about how In-                                                                    formation requires political patience
            dia can reduce long-term vulnerabili-                                                                 and sustained implementation at
            ty to external shocks.            Members of a political party stage a protest against the fuel price hike at Jantar Mantar in New   both the central and state levels. Fi-
                One answer lies in turning the                       Delhi (ANI Photo/Sumit Pal)                  nancial buffers can buy time. Struc-
            crisis into an investment opportuni-                                                                  tural reform alone can buy resilience.

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