Urban demand more resilient than data suggests, says CEA Nageswaran

Chief Economic Adviser V Anantha Nageswaran said urban demand may be stronger than reflected in official data, citing UPI growth and SME spending. He projected FY26 growth at 6.3–6.8 per cent and emphasised the need for innovation to sustain exports

Kolkata: Chief Economic Adviser V Anantha Nageswaran on Thursday said that some indicators suggest weakness in urban demand, but the reality may be stronger than what data captures, pointing to rising UPI transactions and spending at smaller enterprises as evidence of resilience.

Speaking at an interactive session organised by the Merchant Chamber of Commerce and Industry here, he said a shift of spending towards non-listed companies and smaller businesses may not be adequately reflected in headline statistics.

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“On the surface, there is some weakness in urban demand, but underlying urban consumption may be more resilient than we think,” Nageswaran said, citing double-digit annualised growth in UPI transactions across categories such as restaurants, bakeries, and utilities over the past 13 months.

Several government measures, including tax cuts, GST relief, and employment-linked incentives, and low food inflation, boosting disposable income, are also expected to support urban consumption, Nageswaran said.

According to data, rural demand, he said, remains a bright spot with rising wages, higher crop acreage, and strong tractor and two-wheeler sales. Bank credit to micro and small enterprises is performing “very well”, while more companies are raising funds through capital markets, with resource mobilisation growing 28.5 per cent annually over the last six years, he said.

On growth, Nageswaran said India’s economy expanded 7.8 per cent in the first quarter of FY’26. The estimated growth rate for the current financial year is between 6.3 per cent and 6.8 per cent in real terms, with confidence leaning towards the upper end, he said.

Turning to global trade issues, the CEA acknowledged concerns over higher tariffs on Indian exports. He expressed hope of a resolution in the coming months but cautioned that the broader impact on sentiment, investments, and employment is hard to quantify.

He hoped that both penal and reciprocal tariffs would be dissipated, given the progress in negotiations. However, if the issue spills over beyond FY’26, growth may be impacted, according to the chief economic advisor.

Despite these challenges, he said India’s exports of goods and services are nearing USD 850 billion annually and are on track to hit USD 1 trillion. However, sustaining growth will require greater innovation, new market exploration, and higher R&D investment, he said.

Nageswaran said that India has benefitted from political and fiscal stability as well as structural reforms over the past decade, which have improved the growth-inflation balance.