Deploy a prudent macroeconomic strategy supported by robust institutions

However, to sustain this momentum and realize the vision of Viksit Bharat by 2047, it is imperative to adopt a forward-looking and coordinated macroeconomic strategy, underpinned by structural reforms, policy innovation and institutional capacity building.

Looking ahead, India must pursue a calibrated approach to inflation management, uphold fiscal prudence at both the central and state levels, maintain a stable monetary policy and modernize its statistical infrastructure. This will not only sustain India’s growth momentum but would also ensure that its development journey remains inclusive and resilient in the face of global headwinds.

India’s inflation dynamics, particularly its recurring food price spikes, have constrained the effectiveness of monetary policy. The current framework does not adequately distinguish between transitory and persistent inflationary pressures, which could lead to interest rate decisions that do not fully address the underlying causes.

Since transitory food inflation often drives headline inflation, a persistence-based response framework should be considered. This approach would incorporate real-time inflation decomposition tools to separate short-term shocks from structural trends, enabling better targeted monetary policy.

Recognizing the need for better policy coordination, CII proposes a council for fiscal-monetary policy coordination. This body would facilitate a structured dialogue between the government and Reserve Bank of India (RBI), aligning inflation management with supply-side interventions for greater impact.

Price volatility in essential perishables such as tomatoes, onions and potatoes strains household budgets and creates policy challenges. To address this, the government should create a decentralized buffer stock mechanism, enabling procurement during peak harvests and release during lean periods to prevent sharp price fluctuations. Expanded cold storage and regional distribution networks would help build a resilient supply chain, reduce pressure on production hubs and avoid distress sales, boosting farmer incomes.

Investments in agro processing through initiatives like Operation Greens and agro processing clusters should be accelerated to reduce post- harvest losses and stabilize prices. To mitigate climate-induced risks affecting output, a mission for climate adaptation in agriculture should be launched. Leveraging the government’s agri stack, this mission could foster collaboration among weather agencies, research institutions and supply chain players to support climate-resilient farming practices.

Alongside inflation control, fiscal prudence is crucial for long-term stability. CII recommends a two-tier fiscal council system, comprising a central fiscal council and state fiscal councils, to independently assess budgets, debt sustainability and fiscal risks.

To enhance fiscal transparency, the government should reinstate its multi-year fiscal outlook and publish annual or biennial fiscal stability reports. Additionally, an expert committee should be constituted to develop a credible framework for reducing revenue deficits. This should be supported by efforts to broaden the tax base and increase revenue receipts.

To improve the efficiency of subsidies, CII recommends a transition to direct benefit transfers (DBTs) for both food and fertilizer subsidies. By replacing in-kind transfers with cash, the government would reduce waste, improve targeting and encourage dietary diversification beyond rice and wheat. Similarly, fertilizer subsidies should be restructured into direct support for farmers, ensuring accountability and flexibility.

At the state level, the institutionalization of public debt management cells (PDMCs) and a state borrowing credit rating system, aligned with recommendations of the 15th Finance Commission, would be helpful. This system would assess state borrowing costs based on metrics such as debt sustainability, revenue generation and adherence to fiscal targets.

A fiscal performance index (FPI) should also be developed to provide a holistic view of state-level financial health, tracking indicators such as expenditure quality, debt burden and capital efficiency.

Credible and quality data is the foundation of effective policymaking and investor confidence. Yet, India’s statistical system continues to face challenges in timeliness, transparency and institutional authority. CII emphasizes the need for statistical modernization by establishing an independent National Statistical Authority with regulatory powers to ensure uniform methodologies and compliance across agencies.

Further, a national statistical technology and innovation mission should be launched, leveraging AI, machine learning, blockchain and big data analytics to transform data collection and dissemination. Key initiatives could include a high-frequency data repository, AI-based nowcasting models for GDP, inflation and employment, and a data ethics and governance framework to ensure privacy and responsible use.

This is an opportune time to institutionalize regulatory impact assessments for all government regulations to ensure that new ones are evidence-based and aligned with the nation’s priorities.

India’s aspiration to become a developed economy by 2047 rests on a disciplined and forward-looking macroeconomic strategy. A system that prioritizes inflation control, ensures fiscal sustainability and maintains a modern statistical system will not only help the country withstand global challenges, but also help it emerge stronger, more competitive and truly inclusive in its development journey.

These priorities also resonate with the wider reform agenda outlined in CII’s recent Report on Policies for a Competitive India. Developed through extensive consultations with industry leaders, economists and CII task forces, the report presents a strategic blueprint to enhance the country’s overall competitiveness.

Strengthening macroeconomic institutions and adopting prudent policies, as highlighted here, are central to laying the bedrock for sustained prosperity on our path to Viksit Bharat.

The authors are, respectively, former president and director general, Confederation of Indian Industry (CII).