India can be a ‘beacon of stability’ in a chaotic world order, says Neelkanth Mishra

As the global economy grapples with geopolitical fragmentation, trade realignments and post-World War II order reform, India could emerge as a rare pillar of stability, said Neelkanth Mishra, Chief Economist, Axis Bank and Head of Global Research, Axis Capital.Speaking to ET Now on the sidelines of Mumbai Climate Week, Mishra said the world is undergoing “seismic shifts” without a coordinated grand strategy, leading to what he described as a potentially chaotic decade ahead. But amid this uncertainty, India stands out as a trusted, stable and open economy.

Global instability opens doors for India

“The world is looking for trusted partners and large sources of stable demand,” Mishra said, adding that India’s macroeconomic stability makes the country well-positioned to benefit from the global churn.He emphasized the government’s emphasis on:

• Budgetary discipline
• Stable balance of payments
• Well-capitalized financial markets
• Openness through Free Trade Agreements (FTAs)

According to him, almost 70% of India’s exports are now covered by FTAs. The country is also relaxing Quality Control Orders (QCOs) and opening up markets – steps that strengthen the country’s image as an open, rules-based economy at a time when mercantilist trends are on the rise worldwide.

With strong and growing domestic demand, India could benefit as companies diversify supply chains and look for reliable growth markets.

Growth prospects: why Mishra is confident

On whether India’s growth performance versus other emerging markets will be sustainable over the next three to five years, Mishra expressed high confidence.

He noted that fiscal consolidation has been necessary in recent years to reduce the debt ratio and lower the cost of capital. However, this consolidation also had a drag on overall demand.

“With the budget deficit not having to decline materially, the economy can return to its natural trend growth,” he said, suggesting growth could accelerate from last year’s moderate levels.

A turning point in the investment cycle: real estate and power in focus

Mishra pointed to early signs of a revival in key sectors:

• A rotating real estate cycle
• An improvement in energy generation
• Strong rebound in business investment

While government capital expenditure has been a major driver in recent years, he clarified that public investment is only about 3.1-3.2% of GDP. India’s total investment ratio is about 33%.

Significantly, this marks a sharp improvement from 2021, when the ratio was just 27%. That 6 percentage point increase in investment intensity, he noted, was largely due to private sector participation.

“About 1.5% of GDP came from the central government, but the rest was private,” Mishra said.

Residential construction – both residential and commercial – is a large part of this investment revival, underscoring the broad-based nature of the recovery.

The big picture

In a decade that could be defined by global volatility and fragmented trading blocs, India’s combination of prudent fiscal policy, macro stability, strong domestic demand and rising private investment could deliver sustainable growth.

If these trends continue, India could not only remain one of the fastest growing major economies but also become a preferred economic partner in an increasingly uncertain world.