Arvind Panagariya Calls for Dedicated Privatisation Ministry and PSU Reform

Former Niti Aayog Vice Chairman Arvind Panagariya has urged the Indian government to restart its aggressive disinvestment agenda to bolster economic reforms. He argues that reviving the privatisation of Public Sector Undertakings (PSUs) and Public Sector Banks (PSBs) is essential for India's journey toward the "India@2047" vision.

The Case for a Dedicated Privatisation Ministry

In a recent interview, Panagariya proposed the creation of an independent privatisation ministry to streamline and accelerate the government's disinvestment programme. He maintains that the sale of state-owned assets and banks is a fundamental pillar of economic modernisation.

Panagariya emphasized that this reform agenda should remain a priority, regardless of global headwinds such as geopolitical uncertainties or crises in West Asia. By centralising the privatisation process, the government could move away from piecemeal sales toward a more strategic and rapid structural overhaul of the public sector.

Addressing recent concerns regarding capital outflows, Panagariya highlighted the underlying strength of Foreign Direct Investment (FDI) in India. He noted a significant upward trajectory in gross FDI inflows, which rose from $71.3 billion in FY24 to $80.6 billion in FY25, and is projected to reach $94.5 billion in FY26.

He explained that the recent outflows are not necessarily a sign of weakness but rather a natural lifecycle of private equity. As Indian companies go public through an accelerated IPO market, private equity investors often exit their positions to realise gains. Furthermore, he viewed the rising overseas investments by Indian companies as a positive sign of corporate maturity and global expansion.

Regarding Foreign Portfolio Investment (FPI) outflows, Panagariya suggested that the trend was driven by overvalued Indian equities. However, with a recent valuation correction having taken place, he expects these outflows to stabilize by FY27.

Currency Stability and Export Competitiveness

Panagariya also provided insights into the Indian Rupee and its impact on trade. He suggested that the currency is no longer significantly overvalued following recent depreciation. He cautioned the Reserve Bank of India (RBI) against being "psychologically" resistant to letting the rupee cross the Rs 100-per-dollar mark for extended periods.

This stance is rooted in the need to protect India's merchandise exports. Highlighting historical data, he noted that exports fell from $310 billion in 2011-12 to $260 billion in 2015-16 before recovering to $320 billion in 2019-20. A more competitive, depreciated rupee is seen as a vital tool for maintaining export momentum.

Outlook on Inflation and Agriculture

Despite concerns regarding monsoon forecasts, Panagariya remains optimistic about India's food security and inflation outlook. He noted that India's reliance on rainfall has decreased, water reservoirs are currently in good condition, and the national buffer stock remains robust. He concluded that there is currently no compelling reason for alarm regarding agricultural output or subsequent inflationary pressures.

Key Takeaways