Exclusive | GST, Labour Reforms And Global Ties To Fuel India's 2025-26 Economic Momentum: NITI Aayog Ex-Vice Chairman Rajeev Kumar

By Saurabh Shukla

New Delhi: Despite global uncertainties and geopolitical friction, India's economic outlook remains resilient with growth projected above seven per cent in FY 2025-2026. In an exclusive conversation with ETV Bharat, former Vice Chairman of NITI Aayog Rajeev Kumar stated that recent GST (Goods and Service Tax) and labour reforms have boosted momentum, but he stressed that future expansion will depend more on employment generation than tax changes.

Trade negotiations with the United States, he noted, remain complex as India balances demands for agricultural market access while pushing to finalise a bilateral investment treaty that could unlock greater American investment and technology inflows. Interestingly, the weaker rupee often seen as a macroeconomic concern is now being viewed as an asset for boosting labour-intensive exports and creating jobs.

Highlighting the current global trends, Kumar said the upcoming Union Budget is likely to sharpen its focus on easing business conditions for exporters streamlining Production Linked Incentive (PLI) schemes and accelerating investment in emerging sectors such as artificial intelligence. Analysts also highlight that targeted public spending from AI infrastructure and shipping logistics to foreign tourism can fuel high quality employment particularly for educated youth. With strategic partnerships involving both the US and Russia, India is banking on diversified trade relationships and sustained structural reforms to maintain strong growth even amid a volatile global economy, Kumar added.

Here are excerpts from the interview.

ETB: We have seen many geopolitical concerns over the past year. What is the current economic scenario, and how do you see the Indian economy growing in the next year?

Rajeev Kumar: Current scenario is actually quite amazing because we have tackled all the geopolitical uncertainties, including the Trump tantrums. And in the last two quarters, the economy has grown at 7.8 and 8.8 per cent in real terms. That just shows that this economy has resilience. Having said that, I think going forward we might see a slight decline in the rates of growth in the second half of the year because the first half has grown at 8 per cent. But overall, the year 2025-26 will see the economy growing at above 7 per cent for sure. That's a very creditable performance for any large economy in the given circumstances.

I am also hopeful for the longer term because of the reform agenda that the government is adopting or has adopted already, and is not just sort of sitting back with a perception that the economy is growing nicely. So, we are on the right track. Huge improvement in our infrastructure is helping everybody, including the corporates. I expect that the economy will continue on this path for the next several years.

ETB: GST has been the biggest reform over the past year. Do you think this momentum will continue or is the GST boost just a temporary benefit for one or two quarters?

Rajeev Kumar: The benefit of the GST will be more likely once-off because people will settle down to the new rates as it were, and the rates are not going to keep coming down. Therefore, the growth of the economy will not be driven by increased consumption due to GST alone, but by increased consumption due to rising employment, which will follow rising growth. So, the GST impact in my view will taper off unless, of course, they can do further simplification and bring fuels under the GST, which at the moment they are not.

So if they can bring energy, like electricity, petrol, petroleum and diesel, under GST, that will help a lot because that will again reduce costs for the industry. And that might then spur another round of growth.

ETB: Several provisions in the new labour codes focus on enhancing female employment opportunities, including easing restrictions on work timings. What impact do you expect this to have on productivity and overall GDP?

Rajeev Kumar: Well, women are half the workforce, and so far they were not allowed to work on night shifts, and certain other restrictions were there which have now been removed by the new labour law and the codification. But here, the key would be how the states implement these laws. You might find that in some states there isn’t a social acceptability for women to work at night, so they may not implement this law. And because, again like many other laws, labour is also in the Concurrent List, whatever the Centre announces, it is not incumbent on the states to implement those in that very shape. So they will each find their own ways of doing so. I am hoping that by the time the rules of the labour laws are notified by March, the notification would be done after the widest consultation with the states, so that you get something like a labour council which agrees to all the norms, including those for facilitating women’s employment. And if that happens, then the female labour participation rate, which is actually very low in India compared to other countries, if that goes up, that will be a real gain for GDP and will provide a real boost for our growth.

ETB: What is your assessment of the upcoming India-US bilateral trade agreement? As negotiations progress, do you expect a meaningful breakthrough, or will key sticking points remain that could still pose challenges for India?

Rajeev Kumar: I don't expect the entire rollback because the US President Trump is quite clear that he doesn't want imports of garments, auto parts and other things into the US. So I think those will remain. Pharma has already been exempted. On marine exports, I don't think that will come back. So to that extent, we will have to find new markets. And I am glad to see that this process has already begun. Although exports to the US are down by about 12-8 per cent, it has not affected overall exports. My fear, on the other hand, is the US insistence on permitting their agricultural imports into India because that is one of their major constituencies in the Midwest.

The India-US trade negotiations face potential sticking points such as tariff-free imports of corn, maize or soybeans. However, these could be offset by increased imports of the US petroleum and gas. More importantly, finalising a bilateral investment treaty is seen as crucial, especially for encouraging smaller US investors to bring capital and technology to India. Securing this treaty may ultimately have a greater long-term impact than the trade agreement itself, as foreign investment and technology inflows cannot be easily substituted.

ETB: Experts suggest that India is aligning to some extent with US expectations by reducing oil imports from Russia. How do you see this affecting India's current account deficit and overall economic stability?

Rajeev Kumar: I am not clear whether we will stop buying all oil from Russia. I think some of it will continue. But nonetheless, whatever we are not going to buy will mean a higher cost, unless, of course, as is happening, the global price of oil and gas falls, because that is what the recent trend has been: demand falling, especially from China, has pushed global prices down. So to that extent, you may not be impacted that much negatively. But with Russia, our relations are so long and so strategic that I think they will continue, and the Russians understand our own compulsions. As long as we have that understanding and the ongoing relationship on our defense equipment, I think Indo-Russia relations will not be impacted by our buying less oil or gas from Russia.

ETB: What are your expectations from President Putin's upcoming visit this week?

Rajeev Kumar: I share the same expectations, that this visit will reinforce our longstanding fraternal ties. Russia has always stood by India and has never wavered in its support. We can count on them in global negotiations and strategic matters. I believe President Putin will reaffirm this commitment, and I also hope that India will convey the message that this is not an era of war and that peace should prevail. I trust he will take this message to heart and act accordingly.

ETB: While the markets are at record highs and GDP growth remains strong, one concern is the rupee, which is sliding towards record lows. What is your assessment of this situation?

Rajeev Kumar: A declining rupee is not a matter of concern. Whom does it affect? Only those who have lots of money to go on foreign travel, or who are sending their children to study abroad, or who are importing luxury items. So declining rupee is a concern to them. I have always been a proponent of a weak rupee because a strong rupee is only meant for the elite and not for the common person of India.

The more concerning thing is employment, especially educated youth employment, and that has to increase. And that can increase much better not by gig workers, but by growing our labour-intensive export industries. I think that is what we should be focusing on. And for that to happen, a weak rupee is a good thing. This whole notion that a strong rupee is good for this country is patently wrong.

ETB: What's your expectation from the budget regarding job growth?

Rajeev Kumar: I believe the upcoming budget will focus on further improving the ease of doing business, particularly in export-oriented sectors, which would make these industries more dynamic, drive growth and create employment opportunities for educated youth. It may also strengthen and simplify the Production Linked Incentive scheme, further boosting sectoral growth and jobs.

This apart, the budget could allocate funds for AI centres and necessary infrastructure, supporting large-scale employment in technology-driven industries. One key hope is that it promotes foreign tourism, which happens to be the most employment-intensive sector. With a weaker rupee, increased foreign arrivals would not only bring valuable foreign exchange but also generate widespread local employment, making this one of the most impactful measures the budget could take.

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