Arvind Panagariya Advocates for Dedicated Privatisation Ministry

Former Niti Aayog Vice Chairman Arvind Panagariya has made a strong case for reviving India's disinvestment agenda to fuel long-term economic reforms. He argues that the government must accelerate the privatisation of Public Sector Undertakings (PSUs) and Public Sector Banks (PSBs) to meet the objectives of the India@2047 movement.

The Case for a Dedicated Privatisation Ministry

In a recent interview with PTI, Panagariya proposed the creation of an independent privatisation ministry to streamline and speed up the government's disinvestment programme. He emphasized that regardless of fiscal pressures or geopolitical uncertainties, such as the crisis in West Asia, the modernisation of the Indian economy necessitates a more aggressive approach to privatising state-owned assets.

Panagariya, who currently serves as the Chairman of the 16th Finance Commission, noted that the privatisation of PSUs and most public sector banks is not merely a fiscal tool but an integral pillar of India's structural economic reforms.

Analyzing FDI Inflows and Private Equity Exits

Addressing concerns regarding capital outflows, Panagariya highlighted the resilient nature of Foreign Direct Investment (FDI) in India. He pointed out a significant upward trend in gross FDI, which rose from $71.3 billion in FY24 to $80.6 billion in FY25, with projections reaching $94.5 billion in FY26.

He clarified that the perceived "outflows" are often a natural part of the investment lifecycle. A large portion of FDI enters through private equity; when these firms go public via an Initial Public Offering (IPO), investors naturally exit. With the recent acceleration in Indian IPO activity, these exits have become more frequent. Furthermore, he viewed the rising overseas investments by Indian companies as a sign of domestic corporate maturity rather than a cause for alarm.

Rupee Depreciation and Export Competitiveness

Panagariya also touched upon the valuation of the Indian Rupee, suggesting that recent depreciation has helped correct previous overvaluation. He noted that an overvalued currency can be detrimental to trade, citing historical data where India's merchandise exports dipped from $310 billion in 2011-12 to $260 billion in 2015-16 before recovering.

He expressed hope that the Reserve Bank of India (RBI) would remain pragmatic and not attempt to prevent the rupee from crossing the Rs 100-per-dollar mark for an extended period, as currency flexibility is essential for maintaining export competitiveness.

Optimism Toward Inflation and Monsoon Risks

Despite concerns regarding below-average monsoon forecasts, Panagariya remained optimistic about India's food security and inflation outlook. He noted that India's dependence on rainfall has decreased due to better infrastructure, highlighting that water reservoirs are in good condition. With robust buffer stocks and increased sowing areas, he sees no compelling reason for immediate concern regarding inflationary pressures driven by agriculture.

Key Takeaways