Capex key to India's growth strategy, fiscal prudence remains top priority: Sitharaman at HSBC event

The government will continue to rely on capital expenditure as a key driver of economic growth while maintaining a firm commitment to fiscal consolidation, Finance Minister Nirmala Sitharaman said on Monday, highlighting the Centre's strategy of using public investment to crowd in private sector spending.

"CapEx is a very important component of our growth strategy," Sitharaman said during a fireside chat with HSBC India Chief Executive Hitendra Dave.

The minister said government capital spending encourages private companies to expand and invest. "Because it's such a kind that private sector is also going to come in to expand capacities or establish more capacities. It's important for government to push through with capital expenditure. We find that in the last 4-5 years, it has shown very good results," she said.


Sitharaman added that higher public investment had generated stronger economic returns over time.

"The multiplier has actually grown. And it gives confidence that government is not going to sit back and watch whether growth is growing without doing much," she said.

The remarks come at a time when India remains one of the world's fastest-growing economy at 7.8% despite geopolitical conflicts, elevated interest rates and trade tensions.

While reiterating the government's commitment to growth-supportive spending, the minister stressed that expenditure decisions would continue to be guided by fiscal discipline.

"We have to keep an eye on fiscal intensity. We need to be fiscally prudent," she said.

Sitharaman said calls for higher public spending are often accompanied by arguments that a rapidly growing economy should prioritise investment and growth over concerns about fiscal metrics or sovereign credit ratings.

"Spending is what is required for a growing economy like this," she said, adding that such expenditure must be undertaken responsibly.

In her closing remarks, Sitharaman said there was "no fragility" in the Indian economy.

"There is no fragility. Banks are fine, the economy is robust. Look at the GST numbers," she said.

Goods and Services Tax (GST) collections rose 23% year-on-year to ₹2.3 lakh crore in October, marking the fastest growth since the tax overhaul undertaken a year ago. The collection was also the second-highest monthly GST mop-up on record.

On the banking sector, Sitharaman said, "Our banks have successfully overcome the stress of the 2013-15 period, but they must remain future-ready for upcoming global challenges."