Page 5 - The Indian EYE 052926

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.

www.TheIndianEYE.com