India needs to lift savings to 40% of GDP to sustain 7-8% growth: N K Singh

India needs to raise its gross domestic savings rate to around 38-40% of GDP from the current 34% to sustain economic growth of 7-8% and finance its long-term development ambitions, former Finance Commission chairman N K Singh said at a Finance Ministry conference.

Speaking at the two-day conference on “Financing India’s Journey towards Viksit Bharat” in New Delhi, Singh said India’s strong macroeconomic foundation needs to be supported by higher savings and greater fiscal discipline. He also pointed to India’s 7.8% GDP growth in the first quarter of FY27 and the recent upgrade of the country’s sovereign rating by Japan Credit Rating Agency from BBB+ to A-.

Savings need to rise for 7-8% growth

Singh said India’s gross domestic savings rate is currently around 34% of GDP and needs to move towards 38-40% if the country is to sustain growth in the 7-8% range required for its Viksit Bharat ambitions.

The remarks come as India looks to finance a large investment requirement over the coming decades, with both government and private capital expected to play a bigger role.

Department of Economic Affairs Secretary Anuradha Thakur, who set the context for the conference, said the scale of transformation required to achieve Viksit Bharat “could not be met by Government Budgets alone.”

She stressed that private-sector financing, innovative financing mechanisms and stronger cooperation between different levels of government would be critical.

Focus on state finances, private capital

Singh also called for greater scrutiny of state finances, advocating state-wise debt sustainability assessments and stronger fiscal transparency.

He said states should account for off-budget borrowings, guarantees, arrears and borrowings through state-owned entities. On revenue mobilisation, Singh said the focus should be on using information and technology rather than simply raising tax rates.

Artificial intelligence and machine learning, combined with existing tax databases, can help identify compliance gaps, broaden the effective tax base and improve revenue mobilisation, he said.

Singh also called for a greater shift from public finance towards private capital, with public resources acting as a catalyst. Predictable rules, enforceable contracts, faster dispute resolution and stronger investment treaties would help facilitate domestic and foreign investment, he said.

States need to raise capital spending

Chief Economic Adviser V Anantha Nageswaran said states would be central to India's development push, outlining priorities around private investment, project preparation and capital expenditure.

He referred to a proposal to increase states' capital outlay from approximately 2.4% of GSDP to 3% by 2031-32, despite fiscal constraints. Nageswaran also called for better project pipelines and credible project reports to facilitate access to domestic and multilateral financing.

“Viksit Bharat depends on Viksit Rajya,” Nageswaran said, stressing the need for states to convert ongoing reforms and expert recommendations into partnerships with clear responsibilities and timelines.