MC EXCLUSIVE India’s 8% growth hinges on private investment revival, says Michael Patra

Former RBI deputy governor Michael Debabrata Patra. (file photo)

India’s push for sustained 8 percent growth, considered vital to realise the goal of Viksit Bharat, depends on a strong revival of consumption, which will push companies to add capacity, former deputy governor of Reserve Bank of India (RBI) Michael Patra has said.

The finance ministry and several experts say that India needs to grow by around 8 percent a year at least over the next decade to emerge as a developed country by 2047, when the country celebrates 100 years of independence.

“Private investment is key because public capex, which is happening as well cannot be a lasting lever. It can only pump prime private investment and create the enabling infrastructure. The other lever is exports, but they are hit by the global situation. When demand grows, and capacities are fully utilised, then private investment will grow to meet the demand,” Patra told Moneycontrol in an interview.

Private investment would not pick up until demand grows and companies feel the need to create new capacity, he said.

“If consumption takes off, which both RBI and the government are trying to boost, revenue sales growth will pick up and as demand exceeds the existing capacity, it will induce manufacturers to create capacity, and then private investment will start picking up.”

Consumption

Patra identified exports, investment and consumption as the three levers to boost demand.

There are three levers to spur demand. One is exports, which is hurt by the global uncertainty. “The other is private investment; government investment is only a pump primer, the creator of infrastructure such as construction of highways etc, and that has taken off. But for strong private investment you need consumption to grow strongly. That is why consumption is the lever that is being focused on”, Patra said.

The recent reduction and rationalisation of direct tax and goods and services tax rates and RBI measures should support festival season demand. “We are waiting for consumption to pick up. If consumption picks up, I am sure private investment will follow,” he said.

Growth trajectory 

High inflation two years ago eroded demand, prompting the RBI to pursue an aggressive anti-inflation policy to bring inflation down, Patra, whose stint at the central bank ended in January, said. “So today’s low inflation is the benefit of that policy,” he added.

Patra said India returned to a higher growth path after the pandemic. “After the pandemic, the growth rate has averaged 8 per cent plus during 2021-25. In the first quarter of 2025-26, it has clocked 7.8 per cent. I am very hopeful that we will get back to the 8 percent trajectory,” he said.

On the ongoing review of the inflation targeting framework, he said a public consultation process was underway.