Arvind Panagariya Calls for Dedicated Privatisation Ministry and PSU Reform

Former Niti Aayog Vice Chairman Arvind Panagariya has proposed a strategic overhaul of India’s disinvestment agenda, advocating for the creation of a dedicated privatisation ministry. He argues that the aggressive privatisation of Public Sector Undertakings (PSUs) and Public Sector Banks (PSBs) is essential for the "India@2047" vision of economic modernisation.

The Case for a Dedicated Privatisation Ministry

Panagariya believes that for India to achieve its long-term economic goals, the government must resuscitate its privatisation programme. He suggests that a standalone ministry would provide the necessary focus to accelerate the disinvestment of PSUs and most public sector banks.

Crucially, Panagariya maintains that this reform agenda should remain insulated from global volatility. He stated that the drive for privatisation should continue regardless of geopolitical uncertainties, such as the crisis in West Asia, or immediate fiscal pressures. For Panagariya, disinvestment is not merely a fiscal tool but a fundamental pillar of India's structural economic reforms.

Addressing recent concerns regarding capital outflows, Panagariya highlighted the underlying strength of Foreign Direct Investment (FDI) in India. He pointed to a steady upward trajectory in gross FDI inflows: rising from $71.3 billion in FY24 to $80.6 billion in FY25, with projections reaching $94.5 billion in FY26.

He explained that the perceived outflows are often a natural part of the investment lifecycle. A significant portion of India's FDI comes via private equity; as Indian companies accelerate their IPO activities, these investors naturally exit their positions to realize gains. Furthermore, he noted that the increasing trend of Indian companies investing overseas is a sign of corporate maturity rather than a cause for alarm.

Rupee Valuation and Export Competitiveness

On the macroeconomic front, Panagariya shared his views on the Indian Rupee and its impact on trade. He suggested that the currency is no longer significantly overvalued following recent depreciation. He expressed hope that the Reserve Bank of India (RBI) would avoid the "psychological trap" of preventing the rupee from crossing the Rs 100-per-dollar mark for an extended period.

His reasoning is tied to export competitiveness. He noted historical data where an overvalued rupee negatively impacted merchandise exports, which fell from $310 billion in 2011-12 to $260 billion in 2015-16 before recovering to $320 billion in 2019-20. A more flexible rupee could provide the necessary cushion for Indian exporters to compete globally.

Inflation and Monsoon Outlook

Despite concerns over below-average monsoon forecasts, Panagariya remains optimistic about inflation stability. He noted that India's dependence on erratic rainfall has decreased due to better infrastructure. With water reservoirs in good shape, increased sowing areas, and robust buffer stocks, he sees no compelling reason for immediate concern regarding food inflation or supply shocks.

Key Takeaways