'Private Investment Crucial to Realising Viksit Bharat Vision'
Our Bureau New Delhi: Private sector investment is critical to realise the government's Viksit Bharat vision as public expenditure alone cannot bridge the financing gap, economic affairs secretary Anuradha Thakur said on Friday. Speaking at a conference of finance ministers and finance secretaries of states and union territories, Thakur 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 said.
Thakur also urged states to increase their capital outlay to push development. States have budgeted around 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' at the conference. It identified land and urbanisation value, housing finance and deeper credit flows as potential avenues for financing growth.
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, the presentation said. Thakur said global recognition such as sovereign rating upgrades underscore India's growing economic strength, improving business climate, and strengthening position in the investment landscape.
N K Singh, chairman of the 15th Finance Commission, said private capital should complement, rather than replace, public financing. India will need to save more, mobilise more private capital and allocate investment more efficiently to sustain the 7-8% growth needed for the Viksit Bharat goal, he said.
Singh called for closer fiscal coordination between the Centre and states as India enters an "inflection point" and 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, however, said the Centre was on course to achieve its 50% debt-to-GDP target by 2030-31, with a one percentage point margin.
The country should raise gross domestic savings, combining households, the private sector and government, to 38-40% of the GDP from around 34% now to support the investment required for its development ambitions, Singh said. Speaking at the event, Kotak Mahindra Bank founder Uday Kotak 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 leveraged state in the world, has a fiscal deficit lower than India, he said: "We need to get tighter." Kotak also said the country should find a solution to its high gold imports, saying the gross gold import bill could reach $88-90 billion in FY27, He suggested setting up a committee to examine the issue. He said India must focus on seven key areas - 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.