The main driving forces behind the financing must increasingly come from within: Anantha Nageswaran

V Anantha Nageswaran, Chief Economic Adviser, Government of India Photo credit:

He noted that global capital has supplemented India’s domestic savings for decades, supporting infrastructure, technology adoption, financial deepening and private sector expansion.

But if capital flows continue to move along geopolitical fault lines, the CEA warned that external financing alone will be insufficient to meet the scale of the country’s development ambitions.

“External capital can and should complement our efforts, but the strategic burden must rest on domestic institutions. Uncertainty can only be blunted by institutional strength at home and our financial sector must evolve into our most reliable source of stability. Last year I noted that fiscal, financial and monetary decisions are inherently local. That is even more true today,” he said.

The CEA emphasized that ‘business-as-usual’ financing will not suffice in an era characterized by uncertainty and technological discontinuities.

“The way we borrow, how we assess risk and how capital markets allocate value all need to evolve. The banking system is healthier today than it has ever been in recent history. Non-performing assets have fallen sharply. Provisioning has been strengthened. Capital adequacy is robust and liquidity remains comfortable. Regulatory efforts to facilitate ease of doing business will further improve the operating environment,” Nageswaran said.

the next jump

The CEA noted that balance sheet health is just the beginning, and the next step requires moving from balance sheet preservation to balance sheet deployment.

Past credit cycles have left scars, leading to a preference for short-term lending, high levels of collateral and a preference for established companies over innovators, he added.

“If India is to build manufacturing capacity for the next decade and beyond, our financial institutions must patiently provide long-term capital that supports companies throughout their growth trajectory, not just their immediate credit needs. That requires ambition, an ambition that reflects the scale of the country’s aspirations. Banks and financial institutions must become bolder, more technologically astute, and more willing to take calculated risks,” he said.

Referring to its various interactions, both within and outside the country, the CEA said he felt that India’s private sector in general has found enough reasons to remain cautious and risk-averse but not make investment and other decisions that would turn these strategic constraints we face today into opportunities.

“…So there is a need for ambition, for risk-taking and for long-term investment. Otherwise, as it has discovered over the course of this year, India will fall short in terms of strategic resilience, let alone building strategic indispensability in a world where we want to be one of the biggest players in the coming years,” he said.

Published on November 17, 2025