Private sector must now lead investment cycle, including R&D: FM Sitharaman

The Finance Minister’s comments assume importance as recent economic data has led economists to point out that private investment has begun to take hold.

India’s GDP grew at an unexpectedly fast rate of 7.8% in the April-June quater, aided by a sharp 11.9% growth in Gross Fixed Capital Formation (GFCF), a proxy for investments, compared with 5.8% growth in the first quarter of 2025-26. Without adjusting for inflation, or in nominal terms, GFCF growth in April-June was a sharp 20.4%, helping increase its share in GDP to 34.3%. It stood at 31.4% in April-June 2025.

While much of the focus over the last few years has been on getting the private sector to invest more, a pick up in credit growth since the middle of 2025 is being widely seen as a sign of the non-government capex cycle taking off. As at the end of August, banks’ non-food loans were up almost 19% year-on-year.

Referring to Kautilya’s Arthashastra – Sitharaman was speaking on the first day of Kautilya Economic Conclave, organised by the Institute of Economic Growth and the Ministry of Finance – the finance minister said the book places the treasury at the base of statecraft, with the lesson being that a state that “guards its finances in calm years retains the freedom to act when conditions turn”.

“We need to keep building resilience as we go along; it is not a one-time exercise,” she added.

The government has pursued reforms in taxation, finance, insolvency, business regulation, infrastructure planning, and public administration, she said. And while the process has been gradual, the ambition has been “transformational”, with the foundations reinforcing one another.

“The next stage is to convert these capacities into higher productivity, better employment and wider opportunity—so that more citizens, enterprises and regions can contribute to, and benefit from, India’s development towards 2047,” Sitharaman said.

Apart from private sector leading investments, Sitharaman also said there were several other priorities to prepare for the coming years. These include structural autonomy in strategic inputs, as strategic resource security “sits at the centre of macroeconomic policy”.

Further, global openness remains important, Sitharaman said, adding that a more resilient global economy will need countries to diversify partnerships, keep markets open, honour commitments, and work together to keep trade stable and predictable to the extent possible.

“Equally important, the global financial architecture must reflect the economies where growth now lies,” she said, arguing for the work on reforming multilateral development banks to be taken forward and be translated into “larger, faster and more predictable long-term finance for developing economies”.