Capital, cities and competitiveness: A growth agenda for India

Subscribe to enjoy similar stories. India’s economic challenge today is to sustain a growth of 8-9% over the next two decades to achieve its vision of a Viksit Bharat by 2047. The upcoming Union Budget must focus on reforms that raise India’s long-term growth potential.

First, efforts should be made to lower the cost of capital. India’s private credit-to-GDP ratio remains low for an economy of its size and ambition. Banks are mandated to keep a significant share of deposits in government securities.

A calibrated, phased reduction in the statutory liquidity ratio will create substantial lending capacity, thereby cutting borrowing costs and improving competitiveness. Equally important is addressing the “missing middle" in enterprise growth. While India has vibrant startups and large firms, too few small enterprises scale up to become medium-sized champions.

Expanding credit guarantees to medium enterprises, with higher coverage for exporters, can crowd in private lending, enable scale, and generate employment without distorting market discipline. Second, cities must be treated as engines of growth. Our cities can be drivers of growth, yet weak municipal finances, fragmented planning, and capacity constraints hold them back.

The Budget must operationalise the Urban Challenge Fund, tying funding to outcomes: Geographic Information System-based master planning, modern property tax systems, professional urban staffing, waste management, and land value capture. Urban reform is not a municipal issue alone; it is critical for India’s growth story. Third, our trade competitiveness requires an integrated approach to customs and tariffs.