India needs investment rate of 34-35% of GDP to hit 8% growth: Surjit Bhalla

India needs to lift its investment rate to around 34-35% of GDP to achieve an 8% growth trajectory, with a sharp revival in private investment crucial for boosting productivity and sustaining long-term expansion, former Economic Advisory Council to the Prime Minister member Surjit Bhalla said on Monday.

Speaking on the sidelines of the Elara India Dialogue 2026: Aswamedh-India Renaissance in Mumbai, Bhalla said India's current investment-to-GDP ratio of around 28-30% was consistent with long-term growth of about 6.5%, but a significantly higher investment rate would be needed to push growth to 8%.

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He said the composition of investment matters as much as its overall level, with private investment historically delivering greater productivity gains than government spending.

"You need government investment, but for productivity gains, as well as long-term growth sustainability, you need private investment," Bhalla said.

According to him, private investment in India has declined by 5-7 percentage points since 2011-12, creating a significant gap that needs to be bridged if the country is to accelerate growth.

While public investment, particularly in infrastructure, can provide an immediate boost to economic activity, Bhalla said its returns tend to be lower over the longer term compared with investment by the private sector.

With global trade unlikely to provide a major growth tailwind, he said India would need to rely increasingly on domestic investment to achieve its 8% growth ambition.

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'Most anti-investment treaty'

Bhalla identified foreign investment policy and the country's bilateral investment framework as key areas requiring reform, arguing that the 2015 Bilateral Investment Treaty (BIT) has acted as a major deterrent to investment.

He described the treaty in unusually strong terms, calling it the "most anti-investment treaty" and linking it to India's weaker investment performance.

"BITS Treaty that we have, the 2015, is the most anti-investment treaty anybody in the world has ever seen....a major reason why our investment rate has fallen."

He also called for regulatory reforms and further improvements in the ease of doing business to revive the investment cycle.

Bhalla said the Department of Commerce, although not a regulator in the conventional sense, remains one of the most important government institutions shaping investment decisions. Its policies, he said, can influence investment alongside formal regulators such as the Securities and Exchange Board of India (SEBI).

Ultimately, however, he said the government itself remains the biggest influence on the investment climate.

"The major regulator is the government itself through its policies."