We have a serious challenge in the area of energy due to war, says Arvind Panagariya - The HinduBusinessLineSENSEX 80,015.90+ 899.71NIFTY 24,765.90+ 285.40CRUDEOIL 7,068.00+ 131.00GOLD 161,580.00+ 55.00SILVER 262,500.00+ 1,110.00SENSEX 80,015.90+ 899.71NIFTY 24,765.90+ 285.40NIFTY 24,765.90+ 285.40CRUDEOIL 7,068.00+ 131.00CRUDEOIL 7,068.00+ 131.00GOLD 161,580.00+ 55.00'; } document.getElementById("lgdv").innerHTML = htmlElements; } function numberformat(i) { return Number(parseFloat(i).toFixed(2)).toLocaleString('en', { minimumFractionDigits: 2 }) } async function gatherResponse(response) { const { headers } = response; const contentType = headers.get('content-type') || ''; if (contentType.includes('application/json')) { return await response.json() } return response.text(); } function getWidth() { if (Math.max(document.body.scrollWidth,document.documentElement.scrollWidth,document.body.offsetWidth,document.documentElement.offsetWidth,document.documentElement.clientWidth) > 991) { document.getElementById("mob").style.display = "none"; document.getElementById("lgdv").style.display = "block"; } else { document.getElementById("mob").style.display = "block"; document.getElementById("lgdv").style.display = "none"; } } getWidth();]]>By Shishir SinhaUpdated - March 05, 2026 at 06:54 PM.| New DelhiDr Arvind Panagariya, Chairperson, 16th Finance Commission | Photo Credit: SANDEEP SAXENAThe war in the Persian Gulf poses serious energy challenges to India, said Arvind Panagariya, Chairman of the 16th Finance Commission. The Jagdish Bhagwati Professor of Indian Political Economy at Columbia University also noted that Uttar Pradesh has demonstrated how sound policies, supported by a stable law-and-order situation, can deliver significant results. Excerpts:How do you assess the current state of the Indian economy, especially given the geopolitical situation?The economy’s performance has been better than predicted by nearly all, with all domestic and international institutions, agencies, and individuals having to repeatedly revise their forecasts upward. Based on the new GDP series, real GDP grew at an average annual rate of 7.3 per cent over the three years ending in 2025-26.Manufacturing grew at an average annual rate of 11.2 per cent in real terms. I am cautiously optimistic that we may finally be seeing a significant acceleration in manufacturing growth. Immediately, we do face a serious challenge in the area of energy arising from the Israel-US-Iran conflict. Regarding the challenges posed by US trade policy, we have navigated them very deftly, converting them into opportunities by aggressively forging FTAs with the UK, EU, EFTA, and New Zealand, as well as a trade agreement with the USA.What is the role of trade deals in India’s growth prospects?Trade deals have been a huge plus for India. We are on the way to creating the largest friction-free space for the flow of trade and investment anywhere. When combined with a large, young workforce with a diversified set of skills, makes India the most attractive investment destination for both domestic and foreign investors.What are the three critical areas of reform that you believe should be the Centre’s priority?A large number of big-ticket reforms by the Union government have now been enacted. For the three remaining reforms, I will list trade liberalisation (rollback of tariffs and QCOs, and a lid on anti-dumping measures); replacement of the University Grants Commission Act of 1956 by the new Act currently under consideration by Parliament, and a reform of the LARR Act of 2013 to reduce barriers to acquisition and the price the taxpayer pays for it.How do you view the growth prospects of bigger States like Uttar Pradesh?Uttar Pradesh has definitely turned a corner with its GDP growth in real terms, averaging 8.3 per cent in the three years ending in 2024-25. This is the highest among the large States. Uttar Pradesh represents yet another example that once law and order are established, good policies can yield handsome results.What kind of policy measures do you suggest for bigger states like Uttar Pradesh and Tamil Nadu to further boost growth?There is a large number of reforms that States need to undertake to make urban land markets business-friendly and rural-urban-migration-friendly. They must also take advantage of the numerous flexibilities in the Codes on Industrial Relations and Occupational Safety and Health to make the labour markets more flexible. They must have a 5-7-year programme to privatise all discoms sequentially to prevent haemorrhaging of their finances. School education is yet another area in urgent need of reform by the States.Published on March 5, 2026Sign into Unlock benefits!Access 10 free stories per monthAccess to comment on every storySign up/Manage to our newslettersGet notified by email for early preview to new features, discounts & offers${ ind + 1 } ${ device }Last active - ${ la }