Capex push has revived private investment as India advances towards Viksit Bharat: Nirmala Sitharaman

Finance Minister Nirmala Sitharaman on Thursday said the Centre's sustained public capital expenditure since the Covid-19 pandemic has restored private sector confidence, encouraging companies to invest as the government pursues its vision of transforming India into a developed nation by 2047.

Delivering the C.D. Deshmukh Memorial Lecture at the National Council of Applied Economic Research (NCAER), Sitharaman outlined the government's vision for Viksit Bharat, describing it as a framework built on zero poverty, universal quality education, comprehensive healthcare, skilled employment, full economic participation of women and technological leadership.

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"Viksit Bharat is not an unprecedented ambition. In a way, it is a restoration. 2047 is no longer a distant aspiration. It is an immediate national horizon, and a good deal of it must be settled within the next few years," she said.

She argued that India's growth model differs from conventional economic frameworks, saying prosperity must remain rooted in the country's civilisational values.

"Our model is neither consumerist nor mercantilist, as wealth has meaning only when it strengthens society as a whole," Sitharaman said, adding that India's destiny was to become prosperous without becoming consumerist, wealthy without becoming materialistic, and globally successful without losing its civilisational character.

Linking the government's development strategy to its public investment programme, Sitharaman said sustained capital expenditure had created the conditions for private investment to revive.

"It's the public expenditure that we kept undertaking all these years, with a lot of confidence that the Indian economy will benefit from it, has actually helped the private sector come forward. They are now taking risks and investing so that they can benefit from the growth that India is seeing," she said.

The Centre has steadily increased capital expenditure from Rs 3.39 lakh crore in FY20 to Rs 12.22 lakh crore in FY27, making infrastructure creation a central pillar of its economic strategy.

Sitharaman said government borrowing should be directed towards asset creation rather than consumption.

"With all confidence, I can say that this approach -- that when you borrow money, you borrow it for creating assets and spend it for asset creation -- has its reward, both for you and for the larger public," she said.

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While stressing that debt is a necessary instrument of public finance, she cautioned against excessive borrowing, particularly by states.

"You need to have debt. But you need to apply your mind before you take a call on how much you borrow, when do you borrow, and for what purpose you borrow," she said.

The minister said several states had approached the Centre seeking debt restructuring to reduce their interest burden, but emphasised that governments must remain accountable for their borrowings.

"As long as states realise that debt is otherwise not a thing that you can engage and forget about it, you have to be answerable and you cannot leave debt, yes you will borrow, but explain why you are borrowing and you cannot leave the debt unattended. You have to keep priming it," she said.

She added that while stronger support should be extended to states, lagging regions also needed to improve their performance.

"It cannot be that some states can do well and some others can remain where they are. We have to give them every handholding. You also need a Centre which has the resource to take care of the defence of this country, which takes care of having a policy which will enable exports, manufacturing. It cannot be left to the states... You need to have a Centre to get your investments, policies right," Sitharaman said.

Tracing India's economic evolution, the finance minister said the country's poverty was not its historical norm but the consequence of centuries of invasions, colonial rule and policy choices made after Independence.

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She criticised the central planning model and the Licence-Quota-Permit Raj for concentrating economic decision-making within the bureaucracy.

Quoting C. Rajagopalachari's 1963 essay Workman Quarrels With His Tools, Sitharaman said: "Permit-licence-quota raj, which sits heavily over all national production and trade, was conceived with the intention of preventing chaotic development and illegal exploitation; but in fact it has impeded development and actually promotes exploitation."

She continued with another excerpt: "What appears as progress has been achieved in spite of the incubus, and not on account of the regimentation."

Sitharaman said India's early economic strategy had overlooked exports and integration with global trade at a time when East Asian economies were using exports to drive growth. She described the 1991 economic reforms as measures born out of necessity during a balance of payments crisis rather than deliberate policy choice.

She also highlighted reforms undertaken after 2014, including financial inclusion, formal inflation targeting, transparent recognition of non-performing assets and the Insolvency and Bankruptcy Code, as key structural changes that strengthened the economy.

The Centre has projected a fiscal deficit of 4.3% of GDP for FY27, while estimating the debt-to-GDP ratio at 55.6%, down from 56.1% in FY26. It aims to reduce the ratio to 50% by March 2031.

Concluding her address, Sitharaman said the 2047 target should be viewed as part of India's longer civilisational journey rather than an end in itself.

"While we talk of Viksit Bharat at 2047, it is only a milestone in our larger civilisational arc. Our destiny is not preordained. It is as much as we put in it. The choices we make, the institutions we strengthen, our civilisational roots and the legacy we leave will determine it. It is shaped, not received. Our ambition is to create a grand society where modern progress is anchored in our civilisational heritage," she said.