Arvind Panagariya calls for faster PSU and public sector bank privatisation to support India’s long-term economic reforms
Highlights
• Arvind Panagariya calls for revival of PSU and PSB privatisation programme.
• Suggests creation of an independent ministry to accelerate privatisation.
• Says privatisation is essential for achieving Viksit Bharat 2047 goals.
• FDI inflows rise to $94.5 billion in FY26, reflecting investor confidence.
• High stock market valuations contributed to foreign portfolio outflows.
New Delhi, June 15
Former NITI Aayog Vice-Chairman Arvind Panagariya has called for renewed momentum in the privatisation of public sector undertakings (PSUs) and public sector banks (PSBs), describing the process as an integral part of India’s economic reform agenda.
In an interview, Panagariya said the government should consider establishing an independent privatisation ministry to accelerate the disinvestment programme, arguing that the existing Department of Investment and Public Asset Management (DIPAM) has struggled to maintain the pace of reforms.
“I strongly believe that the privatisation of PSUs and most public sector banks remains an essential component of our economic reforms, regardless of fiscal pressures,” Panagariya said. He added that the programme should continue despite geopolitical uncertainties, including tensions in West Asia.
According to Panagariya, revitalising the privatisation agenda is necessary to achieve the objectives outlined under the government’s Viksit Bharat 2047 vision, which aims to transform India into a developed economy by the centenary of independence.
Panagariya, who played a key role in advancing the privatisation framework during his tenure at NITI Aayog, noted that the programme was formally launched in 2016 but has lost momentum in recent years. He argued that greater private sector participation would improve efficiency, competitiveness and resource allocation across the economy.
Commenting on capital flows, Panagariya said India’s foreign direct investment (FDI) performance has remained strong. FDI inflows increased from $71.3 billion in 2023-24 to $80.6 billion in 2024-25 and further to $94.5 billion in 2025-26, indicating sustained confidence among global investors.
“The numbers clearly show that foreign investors remain optimistic about India’s long-term productivity and growth prospects,” he said.
Currently a professor of economics at Columbia University, Panagariya explained that foreign investors routinely repatriate part of their earlier investments, which can contribute to capital outflows in certain years. He also noted that Indian companies have increased overseas investments over the past two years, leading to additional outward capital flows.
The chairman of the Sixteenth Finance Commission further pointed out that foreign portfolio investment (FPI) outflows had risen significantly in recent years as Indian equity valuations became excessively high. However, he said valuations have since moderated, creating a more balanced investment environment and improving the outlook for future capital inflows.
