India will maintain fiscal discipline with debt-to-GDP as the key metric, while revenue growth and private investments show momentum
The government will not direct household savings, but banks will work to make investment options attractive and effective
Youth and the services sector are being trained to create homegrown IPs and meet domestic and global demand
While the sovereign green bonds issued by the government have not yet gained significant traction, that alone is not a reason to abandon them, says Anuradha Thakur, Secretary of the Department of Economic Affairs (DEA) at the Ministry of Finance.
However, the government has no intention of resorting to measures such as tax breaks to lure investors, despite requests from many participants. “There is a small but existing investor class with some appetite for these bonds,” says Thakur in a post-Budget interview with Outlook Business.
1 January 2026
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The issue of green bonds and their low investor appetite takes on added significance in the broader context of India’s vast resource needs and high cost of capital. Thakur, who led the Budget-making process, as is customary for the DEA Secretary, discusses these concerns, among other topics, in this interview. Edited excerpts:
The 16th Finance Commission has recommended that the Centre reduce its fiscal deficit to 3.5% of GDP by 2031. If the government chooses not to pursue this target, would it be due to slower revenue growth?
I will say two things on that part. One is that the FM last year made a very clear and holistic declaration in the Parliament about the metric for monitoring fiscal prudence, changing it to debt-to-GDP. A certain number was given and it was also stated that fiscal deficit will be the operational way of achieving that. So, we will stay with it.
The second thing is that the revenue growth that has been projected—the fiscal math has been done, and the budget numbers are there for everyone to see. We do notice, especially in the January numbers, a certain enthusiasm and momentum in the economy. Let us see how that pans out. There could be an uptick in growth in those numbers as well.
So far, only one of the ‘big three’ rating agencies has upgraded India’s rating. The others have flagged high general government debt and a lack of significant acceleration in corporate investment, and Moody’s described the budget as ‘tactical’ rather than a ‘breakthrough.’ How do you respond to these assessments?
When the rating agencies approach us, we will respond to them. But responding to you, I would say that we do see an uptick in private investment; we do see that it is growing. I have read concerns about it being concentrated in a few sectors and in some sizes of companies. But once a cycle takes off, there is a certain way it grows.
The budget has also tried to address this issue in two ways. We have kept up our promise of enhanced CapEx; we have enhanced it quite a lot again. We have expanded the sectors in which CapEx can be done. The infra-push is huge in this budget. The Road Transport Ministry's budget has also been scaled up, and significantly new things have been introduced and announced in other transport infrastructure sectors as well, like 20 national waterways.
And the other thing that I will point out, which speaks to private investment, is the champion fund for MSMEs, particularly for SMEs. The SMEs have that potential, while we look after micro with all our other programmes. We do hope that this is also going to be a lever for triggering the investment of the private sector.
With that, the concern should get addressed.
Given the current geopolitical scenario, does the government accept that achieving a growth band of 8–10% may no longer be feasible?
We recognise the potential to grow more, and each year this calibration is reviewed. Right now, we would definitely like to overachieve, especially given that our economy relies heavily on domestic consumption. In that context, many action points have already been implemented through reforms and government schemes highlighted in this budget.
Looking ahead, I believe the economy has multiple levers that should help us achieve, and potentially exceed, this year’s growth projections.
How is the government developing the financial architecture at a time when bank deposits are declining and the bond market remains underdeveloped?
The Honourable FM has already mentioned that we do welcome capital flows and will do what it takes to attract more into the country. That is one.
Achieving this requires reforms at multiple levels. In that direction, the budget announced a high-level committee on banking for Viksit Bharat, a forward-looking initiative. As you pointed out, the banking sector plays a central role in financing the economy.
We have also announced a review of FEMA NDI (Foreign Exchange Management [Non-Debt Instruments]) rules, which govern foreign equity investments. These are the building blocks we are putting in place, alongside regulatory efforts, to make it predictable and easy for both domestic and foreign investors to bring in capital.
The opportunities in the country are huge, and these measures are key to strengthening the financial side.
Will the Centre continue its green bonds programme despite the low investor appetite so far?
In our borrowing calendar, we determine tenors based on the range we see and need to respond to investor appetite. Regarding green bonds, we will not stop issuing them. While they have not yet gained significant traction, that alone is not a reason to abandon them. There is a small but existing investor class with some appetite for these bonds.
And the earlier thinking to not give tax breaks…
That thinking continues.
Do you think the government’s choice to refrain from directing household savings could affect capital formation in the long run?
This issue has two sides. Should households be restricted in their choice of investment instruments? Probably not. Would you or I want such a restriction? Probably not.
India is growing and changing, and with that, savings and investment patterns are evolving. At the same time, it is important to channel savings into productive investments and uses in the economy.
The terms of reference for the Banking Committee are not yet finalised, but I am confident that this topic will be addressed—specifically, how banks can make investment options attractive and effective for savers.
Do you mean that banks will have to attract investors on their own, and the government cannot intervene?
No, I am not saying the government cannot act—it is a choice the government has to make. And as you rightly said, so far the government has not made that choice. It is best to have experts examine the matter thoroughly, analyse it, and provide recommendations on which the government can then take decisions.
Do you think we can create our own IPs in the Orange Economy by skilling youth? Will they not leave India like many STEM workers do, given that the country is still far behind in gaming and animation?
I think the free movement of our people abroad also contributes to services exports. Currently, India accounts for around 4–5% of the global services share, and we have set a target to reach 10% by a certain year. Yes, we need to create our own IPs and train our people so that there is strong demand for services, both in India and abroad.
But I think there is already significant demand within India, and our youth have immense potential to engage in this sector. It is also a space where individuals can thrive independently and they do not always need to be employed by a studio or company. Those opportunities exist as well.
