Pariamentary panel pitches for hike in investment rate to 35% of GDP to achieve 8% growth

Economic Times

a day ago

A parliamentary panel on Tuesday pitched for raising the investment rate from 31 per cent of the GDP to 35 per cent to achieve the ambitious growth target of 8 per cent.
The Standing Committee on Finance also urged the government to maintain sustainable, growth-oriented energy policies that prioritise affordability and efficiency while balancing climate commitments with economic and social objectives.
The committee headed by BJP leader Bhartruhari Mahtab also suggested that the Ministry/Central Electricity Authority (CEA) expedite the development of pumped storage projects (PSPs), recognising their critical role in strengthening energy security and reducing import dependency. The panel noted that the investment rate must increase to about 35 per cent of the gross domestic product (GDP) from the current 31 per cent to achieve the ambitious growth target of 8 per cent annually for at least a decade. "Financing this may result in higher levels of current account deficit (CAD), which is challenging under current global circumstances. This emphasises the need for domestic-led growth, for which deregulation is crucial," it said in its report.
The committee highlighted the collaborative approach through the deregulation task force chaired by the cabinet secretary. The panel felt that this model of cooperative federalism -- facilitating dialogue with states on best practices in land, labour, capital, and regulatory reforms -- can streamline business processes and foster an investor-friendly environment. It said tailored fiscal reforms may be promoted in highly indebted states to improve their fiscal health while maintaining their capacity to invest in critical infrastructure and social development. With regard to farm sector, the panel said the vast untapped potential of India's agriculture sector as a pivotal driver for inclusive economic growth. "To unlock this potential, the committee emphasises a dual approach: addressing immediate challenges while implementing long-term structural reforms. For short-term stability, the committee observes that the government's strategy such as maintaining buffer stocks; regulating market supplies; and subsidising key food items helps to stabilise food prices and ensure affordable access to essential commodities," the report said. To further enhance agricultural productivity and foster financial inclusion, the committee recommended acceleration of digital initiatives. "This includes digitising land records and implementing the agri-stack, a technological framework designed to link farmers' produce with banking and credit systems. This would facilitate transparent and timely disbursement of crop loans," it said. The panel also urged that these digital tools be expanded nationwide, with local youth being trained to assist in data collection, thereby creating employment opportunities and improving data accuracy. The committee also believed that promoting diversified crop production, strengthening supply chain infrastructure, and encouraging private sector participation in agri-tech innovation are vital steps. These coordinated efforts can effectively mitigate supply-side inflation, sustainably boost farmers' incomes, and transform agriculture into a powerful engine for India's growth, it said. Observing that the current global trade environment, marked by protectionism and geopolitical volatility, presents a significant opportunity for India, the committee believed this situation can be leveraged to pursue the guiding principle of 'Sabka Saath, Sabka Vikas, Sabka Vishwas, Sabka Prayas' and build an 'Atmanirbhar Bharat'. This path involves exploring new markets while simultaneously strengthening domestic manufacturing. The committee highlighted the need for sound government finances, with an emphasis on improving the quality of expenditure, particularly capital expenditure, and recognise the pivotal role of AI and data for effective governance. The committee also noted that despite positive corporate earnings, investment in people -- through higher wages, reskilling, and mental health support -- is essential for increased productivity. The committee concluded that India's economic roadmap must aim not only for a short-term USD 5 trillion economy but also for sustained, inclusive, and resilient long-term growth. To achieve this vision, the committee recommended a multi-pronged approach that includes strengthening government finances and nurturing growth engines like innovation and skills development. The committee also recommended the establishment of an indigenous, government-owned AI server to address privacy concerns, improve efficiency, and harness data for informed policy-making. The panel further suggested prioritising rural and urban infrastructure and investing in people.
This strategy, focused on balanced energy policies, price stability, and robust support for MSMEs and women entrepreneurs, should aim to drive inclusive and sustainable growth for a self-reliant India, it added.