India's Chief Economic Adviser V. Anantha Nageswaran has warned that the global trading system is increasingly being used as an instrument of pressure, saying the United States' Graham Act and other trade restrictions amount to "sustained coercion" and that the weaponisation of trade is no longer confined to Washington alone.
Speaking at an event organised by the Public Affairs Forum of India, Nageswaran said trade has been weaponised "well beyond the US," pointing to export licensing regimes, supply-chain chokepoints and similar measures deployed by China and the European Union. His remarks reflected a broader concern in New Delhi that the rules governing commerce, investment and technology are becoming more fragmented just as India is trying to position itself as a reliable destination for global capital.
The CEA said the changing global environment must be factored into how India assesses foreign direct investment performance. He noted that unsettled relations with the US and the absence of an AI-led investment narrative pose near-term headwinds to foreign capital flows into India, even as the country continues to benefit from its broader manufacturing push and reform agenda. For industry, he said, the central issue is not simply access to capital but global competitiveness.
"The global environment in which investment decisions are made has shifted," he said, underscoring that India's FDI story can no longer be judged in isolation from geopolitical tensions, supply-chain realignments and higher borrowing costs abroad.
Nageswaran argued that India's geography and scale leave it with little room to make binary choices in an era of strategic rivalry. "Given India's location, size and geography, India cannot afford to choose. The answer is therefore hedging… and hedging will have a significant cost. And that has to be factored in in our decision making, both in the public and the private sector," he said.
That hedging, he suggested, is not cost-free. India's effort to balance relationships with multiple major powers may help preserve strategic autonomy, but it also raises the price of doing business, complicates investment decisions and forces both government and companies to build resilience into their plans. In a world where trade and technology are increasingly linked to national security, he implied, India must prepare for a more expensive and less predictable external environment.
The CEA also flagged the impact of rising bond yields in advanced economies, saying they are making investors less willing to send capital to emerging markets. "There will be pressure on capital mobilisation for a while," he said, warning that global liquidity conditions are tightening at a time when India and other developing economies still need substantial external financing for growth, infrastructure and industrial expansion.
He added that the narrowing gap between Indian and American bond yields, while welcome in some respects, could itself deter investors who continue to expect a premium of 200 to 300 basis points for emerging-market exposure. Markets, he said, will take time to recognise that debt in rich countries has become riskier, a shift that could alter capital allocation patterns for years.
Nageswaran's remarks come as policymakers across the world grapple with a more protectionist and security-driven economic order. For India, the challenge is twofold: to attract investment despite geopolitical uncertainty, and to ensure that domestic firms can compete globally even as trade barriers, licensing controls and supply-chain restrictions proliferate.
He also cautioned against complacency over India's demographic dividend. While the country has long been expected to benefit from a young workforce, he said that advantage cannot be assumed automatically. Pressures on the mental and physical health of young people, along with rapidly changing skill requirements, mean that the 1.5 to 2 percentage points of annual growth typically attributed to demography "cannot be taken for granted."
The message was clear: India's growth model must adapt to a world where trade is increasingly strategic, capital is more selective and demographic advantages need to be earned through policy, skills and productivity rather than assumed by default.