Private sector investment key for Viksit Bharat: DEA secretary

New Delhi: The ambitious ‘Viksit Bharat' vision will require critical private sector investment, as public expenditure alone cannot bridge the financing gap, Economic Affairs Secretary Anuradha Thakur said Friday.

At a conference of finance ministers and finance secretaries of states and Union Territories, Thakur said that global recognition such as sovereign rating upgrades underscore India’s growing economic strength, improving business climate, and strengthening position in the global investment landscape.

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“We meet today in the backdrop of ongoing global difficulties. Under these circumstances, and because of the scale of transformation we envisage towards ourselves to reach our shared goal, it needs to be borne in mind that this scale cannot be met solely by government budgets, and that private sector financing will need to play a critical role,” she said.

The secretary said that said working groups comprising states have been formed to identify sector-specific financing requirements, which will subsequently be shared with stakeholders.

“Focus on innovative means of financing would be a central piece of this conference deliberations,” she added.

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States have budgeted around Rs 11 lakh crore as capital outlay, equivalent to about 2.4% of gross state domestic product (GSDP) but the target should be 3% by 2031-32, according to a presentation on “Financing for Viksit States”.

It identified land and urbanisation value, housing finance and deeper credit flows as potential avenues for financing growth and that states can facilitate private investment in areas such as renewable energy, energy storage, critical minerals, artificial intelligence and data centres, tourism and agriculture value chains.

Macros

At the same event, N K Singh, chairman of the 15th Finance Commission, said that private capital should complement, rather than replace, public financing. India will need to save more, mobilize more private capital and allocate investment more efficiently to sustain the 7-8% growth needed for the Viksit Bharat goal, he said, while calling for closer fiscal coordination between the Centre and states as India enters an “inflection point”. He proposed state-wise assessments of debt sustainability that reflect differences in growth, interest costs, revenue buoyancy and committed expenditure.

“Private capital can never substitute government finance,” Singh said, adding that the key constraint in crowding in private capital has been the availability of bankable projects.

He also said that the 16th Finance Commission’s trajectory for the general government debt, which includes that of the Centre and states, to bring it down to 73.1% by FY31 remains “somewhat daunting” given the unfavourable geopolitical environment and exogenous shocks.

He said that the government was on course to achieve its 50% debt-to-GDP target, with a 1 percentage point margin, by 2030-31.

Gross domestic savings, putting together households, private sector and government, are currently around 34% of the GDP, Singh said, explaining that India should raise the rate to 38-40%, around its historical peak, to support the investment required for its development ambitions.

East India Co symptom

At the event, Kotak Mahindra Bank founder Uday Kotak called for India to find a solution to its high gold imports, saying the country's gross gold import bill could reach $88-90 billion in FY27, and suggested setting up a committee to examine the issue. He also called for greater fiscal discipline, reforms to attract more capital and improved manufacturing capabilities to help India navigate a fragile global environment and achieve the goal of ‘Viksit Bharat’ by 2047.

Stating that the US, which is supposed to be the most leverage state in the world, has a fiscal deficit lower than India, he said: “We need to get tighter”.

Drawing parallels between the East India Company’s historical expansion and the growing influence of global technology companies and major economic powers, he cautioned that changing global dynamics pose challenges to national sovereignty and economic independence.

Kotak said India must focus on seven key areas, including fiscal consolidation, strengthening the financial system, leveraging global crises for reforms, boosting domestic production, addressing gold imports, balancing regulation with development, and encouraging creative destruction in businesses. He highlighted the need to reduce India's dependence on imports and create products and services that the world wants to buy.

However, he cautioned against excessive financialisation, saying capital markets should ultimately support capital formation rather than become focused mainly on trading volumes and market activity.

“At the same time, we are seeing an East India Company symptom even in the capital markets,” he said.

Referring to the US and China, he said:

“So you have two superpowers out there, and the world rules have changed”.