FM Sitharaman calls for open, predictable global economic ties amid rising uncertainty

NEW DELHI: Finance minister Nirmala Sitharaman on Saturday emphasized the need to keep global economic relationships open, predictable and rules-based, saying countries should pursue dialogue and negotiated agreements rather than allow geopolitical differences to become barriers to trade and investment.

Speaking at the 5th Kautilya Economic Conclave in New Delhi, Sitharaman said, “International trade policy should provide greater certainty for businesses, respect national development priorities, and avoid unnecessary restrictions that fragment markets.”

Uncertainty is now a “standing condition” of the global economy, she said, adding that policies must be designed around it and that building resilience is “not a one-time exercise” but a continuous process.

The global financial architecture must reflect the economies where growth now lies, the finance minister said. This requires strengthening multilateral development banks, an effort taken forward under India’s G20 presidency.

National priorities

National security requires structural autonomy in strategic inputs, Sitharaman said, citing steps taken by the government to replace fragile single-source dependencies with domestic capacity. India has launched the National Critical Mineral Mission, Rare Earth Corridors and the India Semiconductor Mission, among other initiatives, for this purpose, she said.

“The coming years call for preparation, and India approaches them from strength,” the minister said.

Skill-development initiatives must prepare people for a changing world of work, she said. Artificial intelligence (AI) and frontier technologies are already reshaping workplaces, processes and the skills that employment demands.

Sitharaman called on the private sector to lead the investment cycle, including in research and development (R&D), taking the baton from the public sector.

The private sector currently accounts for just 36% of India’s R&D spending, a key reason why such expenditure in the country is only about 0.83% of gross domestic product, well below the 2.7% for the Organisation for Economic Co-operation and Development.

“Raising both the scale of investment and private sector participation is essential to strengthening our innovation capacity,” she said.

A ₹1 trillion Research, Development and Innovation Scheme launched by the government is designed to support this shift as India moves from “Made in India” to “Imagined and Made in India”, she said.

“As we work towards Viksit Bharat by 2047, let us meet the age of flux with preparation and confidence,” she said.

Global shocks

The shocks of the past four years have been primarily of two kinds, Sitharaman said. Older vulnerabilities, such as elevated crude oil prices, have returned in sharper form amid the West Asia conflict, while US monetary conditions are tightening and global trade barriers are rising.

“The conflicts involving Russia, Ukraine, and Iran, and the disruption around the Strait of Hormuz, added a new kind of shock, one that threatened the physical movement of oil and gas as well as their prices,” she said.

A price shock, she stressed, can be cushioned with monetary and fiscal tools. But a quantity shock caused by geopolitical disruptions tests buffer stocks and the reach of delivery systems, affecting the capacity of the state itself.

“And these shocks have arrived in a world with even thinner buffers,” she said. Global public debt rose to almost 94% of GDP in 2025 and is expected to hit 100% by 2029, a level previously seen only after the Second World War.

She, however, highlighted that India has “come through this period remarkably well with its fundamentals intact and strengthening”.

India’s economy grew at a stronger-than-expected 7.8% in the June quarter, while retail inflation was 4.82% in August, within the central bank’s 2-6% band. The current account deficit was just 0.5% of GDP in the three months through June. Gross bad debt of banks is at multi-decadal lows, and the country’s foreign exchange reserves stand at a healthy $766 billion, she said.

The Narendra Modi government, she said, has worked to bolster the capacities on which sustained development depends. These include the state’s capacity to respond, the economy’s capacity to produce, and the ability of citizens and enterprises to participate in growth, she said.