Former IMF Deputy Managing Director and Chief Economist Gita Gopinath has emphasized that India's policy focus must shift toward improving the ease of doing business and building a positive narrative around artificial intelligence (AI) to attract capital flows and alleviate pressure on the rupee. She highlighted these priorities amid macroeconomic risks stemming from West Asia.
Key levers for India
In an exclusive interview with ANI, Gopinath identified two critical levers for India: undertaking further reforms to enhance the ease of doing business and presenting a compelling story about AI being net positive for the country. She stated that such actions would increase interest in India as a destination for investment capital and help take pressure off the rupee.
AI's global impact
Gopinath pointed to the significant impact AI is already having on global markets and growth. She noted that countries like South Korea, Taiwan, and the United States are witnessing stock markets at all-time highs despite West Asia tensions, largely driven by the AI boom. According to her, the AI narrative is propelling stock market valuations in these nations.
She added that AI is contributing substantially to US growth. In the most recent quarter, approximately half of US growth came from AI-related investments, including the construction of data centers and investment in chips and data processors. This investment surge is a key driver of US growth and has spillover effects on the global economy.
Energy transition and trade agreements
Gopinath also flagged energy transition as a resilience tool for India. She suggested that India can reduce import dependence by shifting away from reliance on fossil fuel imports toward renewable energies and nuclear power. Combined with trade agreements, such as one with the European Union, this reorientation of global supply chains can help India play a larger role as an input provider.
Medium-term buffer
With oil prices potentially remaining elevated until mid-next year, Gopinath emphasized that a stronger investment story built on ease of doing business reforms and AI will serve as India's key medium-term buffer against external shocks. She stressed that these measures would enhance India's attractiveness to global investors and support the rupee.
