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India will need large volumes of long-term capital over the next two decades to finance infrastructure, manufacturing, urbanisation and the energy transition, PK Mishra, Principal Secretary to the Prime Minister, said on Wednesday as he called for a deeper corporate bond market and a broader shift in how the financial system supports growth.
Addressing the 13th SBI Banking & Economics Conclave in Mumbai, Mishra said the financial system must move beyond expanding access to accounts and credit and play a larger role in financing India's next phase of economic expansion. "The financial system must now increasingly move from accommodating growth to enabling growth," Mishra said. India will have to mobilise "very large volumes of capital" over the next two decades for infrastructure, manufacturing, urbanisation, energy transition, enterprise and innovation, he said. Mishra said different areas of the economy would require different forms of financing. "Assets with long gestation periods require capital of long tenure. Innovation requires risk capital. High growth enterprises require equity. Infrastructure requires patient capital," he said. He also underlined the need to deepen India's corporate bond market, saying its development should not be viewed separately from bank financing. "This means that the depth of the corporate bond market is not a separate issue from the health of bank lending," Mishra said. His comments come as India seeks to sustain high investment while reducing its dependence on banks as the main source of long-term financing. Mishra said the country's financial system had already undergone a significant transformation over the past decade, supported by improvements in bank balance sheets, the Insolvency and Bankruptcy Code and the expansion of the formal economy through the Goods and Services Tax. "The banking system of today, as all of you know, is very different from the one we had at the beginning of the previous decade," he said. He said stronger financial institutions had also improved India's ability to withstand external shocks. Mishra also cautioned against complacency, pointing to rising trade barriers, volatile global capital flows, import dependence and rapid changes in artificial intelligence as risks that India would need to manage. "We cannot count on a friendly tailwind," he said, adding that India must improve manufacturing competitiveness and focus on attracting foreign direct investment. Mishra said attracting FDI would require stable tax policies, reliable contracts, better logistics and faster clearances. (ANI)
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