India must double down on domestic reforms to sustain growth amid global uncertainty: Krishnamurthy Subramanian

Former Chief Economic Advisor Krishnamurthy Subramanian has called for India to strengthen domestic reforms, expand manufacturing capacity, and leverage technology-led growth to sustain high economic momentum amid an increasingly uncertain global environment.

In an interview with ET Now, Subramanian said India’s growth story remains predominantly driven by domestic factors and argued that the country should respond to global volatility by reinforcing internal economic fundamentals rather than reacting to every external disruption.

Drawing parallels with Japan’s rapid growth phase between 1970 and 1995 and China’s rise from 2000 to 2025, he said India should focus on policy continuity and structural reforms to maintain long-term growth.

A key driver of India’s next phase of expansion will be the rise of the middle class, according to Subramanian. Growing consumption of products such as refrigerators, air conditioners, automobiles, and other manufactured goods will require India to significantly strengthen domestic manufacturing capabilities. He said this is essential not only for sustaining growth but also for maintaining external sector stability.

Subramanian highlighted that the next generation of reforms must target factor markets—land, labour, and capital—while continuing to improve ease of doing business. He said that these reforms would enable Indian companies to achieve the scale needed to compete globally in manufacturing.

If pursued consistently, such reforms could allow India to offer what he described as “stability with scale”, a combination that could emerge as the country’s defining competitive advantage in an era of global uncertainty.

He also mentioned that how the post-pandemic world has transformed business operations. With remote working, digital collaboration and virtual meetings becoming mainstream, businesses now have greater flexibility to expand investments and create high-quality jobs beyond major metropolitan centres into Tier-2 and Tier-3 cities.

On the MSME sector, Subramanian argued that businesses need to shift from a “just-in-time” production model to a “just-in-case” approach to improve resilience against global disruptions. To support this transition, he proposed the creation of an MSME Stack that integrates data from digital public infrastructure platforms such as UPI, GST and GeM with artificial intelligence to expand access to both credit and equity financing.

Subramanian also stressed the need to adapt macroeconomic policies and business models so that technology and capital complement labour rather than replace it, ensuring productivity gains translate into broad-based employment and rising incomes.

Recognising that individual firms may lack incentives to undertake such transitions independently, he said industry associations including Confederation of Indian Industry (CII), FICCI, and other business bodies can play a crucial coordinating role in overcoming collective action challenges and accelerating the adoption of best practices across sectors. According to Subramanian, these structural reforms will be critical for India to sustain high growth while navigating a rapidly changing global economic landscape.