Private sector investment hasn't kept pace with public expenditure: FM

Says greater access to China may help economy, but sense of caution would have to be built in

India’s private sector investment has not kept pace with the growing public expenditure, Finance Minister Nirmala Sitharaman said on Saturday. Healthy corporate balance sheets are sitting on passive investible funds, instead of companies engaging in capacity expansion, she said. Sitharaman stressed that growth was the topmost priority of the government. While stating that greater access to China may help the economy, she said a sense of caution would have to be built in.

 

Sitharaman was speaking at the launch of the book A World in Flux: India’s Economic Priorities, co-edited by Professor Amita Batra of Jawaharlal Nehru University and veteran journalist A K Bhattacharya. The festschrift honoured economist Shankar Acharya, the longest-serving chief economist advisor to the government of India from 1993 to 2001.

 

In conversation with Bhattacharya, Sitharaman said that Press Note 3 had put restrictions on Chinese investments and various projects, especially in renewable energy, that were held up because of a lack of access to technical experts. Press Note 3, as part of India’s foreign direct investment (FDI) policy, restricts FDI from certain neighbouring countries over national security issues.

 

“During the tariff war between the US and China, there was a lull… Now there is a call saying we need more access, and we need to have a lot more interaction, and possibly opening some windows. And that’s not just from our side,” Sitharaman said.

 

Last week, India resumed issuing tourist visas to Chinese nationals after a five-year hiatus. External Affairs Minister S Jaishankar also recently met Chinese President Xi Jinping during his two-day visit to the country to attend the Shanghai Cooperation Organisation (SCO) Foreign Ministers Meeting.

 

Sitharaman highlighted how the government had kept pace on capital expenditure (capex), which is one of the primary drivers of sustained economic growth. The government, she said, could make the FDI policy more attractive and friendly to attract more investments. The government’s capex increased by 54 per cent in the April-May period of 2025-26 compared to last year, when it was subdued due to elections, according to the Controller General of Accounts data.

 

Talking about her top priorities, the FM said that India needs to be in a leadership position and have a seat at the high table to shape the global institutions that would govern the world for the next 100 years.

 

“We have to redefine the voice of the Global South, and fit ourselves also into it, and be at the table to be able to determine the contours of what the next 100 years would want,” she said.

 

Looking back, the finance minister said the terms of reference given to the expert committee on reforming multilateral development institutions, during India’s G20 presidency, could have been wider. She said India must adapt dynamically to global shifts, while balancing domestic aspirations with fiscal prudence.

 

Sharing her thoughts on “Flux”, the theme of the book, Sitharaman said that institutions that were once seen as stable and effective — particularly multilateral institutions — now appear to be in limbo. “Not just financial institutions, but strategic ones as well,” she added.

 

Sitharaman also highlighted that India needs to attend to the aspirations of all sections, not just by giving money but by creating an overall ecosystem through which they can aspire to grow by themselves.  “The challenge lies in aligning domestic aspirations with resource availability and ensuring that economic priorities evolve accordingly,” she said.

 

Flux: From climate change to global trade

 

A panel discussion on the book highlighted challenges India is facing from the geopolitical situation and climate change priorities in trade and economic growth. 

 

Shyam Saran, former foreign secretary, said that most of the challenges that India faced were global in nature, and multilateralism had ceased to exist. He said there was a dilemma on whether there was a need to create new multilateral institutions or adapt the existing structure with experience and gravitas to face the present challenges.

 

“It is easy to get rid of institutions but very difficult to establish new ones,” Saran said while stressing that the ethical connection that helped India balance the demands of the nation as a state with a sense of larger humanity is now lost.

 

Talking of climate change, Montek Singh Ahluwalia, former deputy chairman of the Planning Commission of India, said that India’s net-zero target was tough but achievable. “Energy transition has to be done… We need to focus not on the objective but on how to get there,” Ahluwalia said. India not going to the International Monetary Fund for assistance during the Taper Tantrum of 2013 was an indication that the economy had some strength, he highlighted.

 

Batra, who teaches International Studies at JNU, said that the recent India-UK comprehensive trade agreement was a strong indication of India’s desire to open up. She said the World Trade Organization (WTO) should not be given up so easily, and instead, countries should start thinking afresh on fitting the WTO with the changes demanded by the world today. Batra said bilateral deals being done on a daily basis by the US are not letting out any details on tariffs and transshipment.

 

“Every country is looking for stability. Allies are changing. Newer partners are emerging, but none of these has a sense of permanence. The need of the hour is to look for partners beyond the one that is the truant economy at this point of time,” Batra added.

 

Sajid Chinoy, managing director, Chief India Economist, JP Morgan, said that India has an impatience for higher growth, to take 6.5 per cent GDP growth to a higher level on a sustained basis. He said that there was a need to appreciate the speed at which India was traversing the demographic transition because once the working age population of the country contracted, it would be challenging to achieve high growth rates for the economy.

 

He said that trade has been the lifeblood of all emerging markets, and it would be a mistake for India to turn inward. “There is plenty of scope for India to increase its share in the global exports,” Chinoy added.