Veteran banker has called for stronger fiscal discipline, reforms to attract greater capital and improvements in manufacturing capabilities as India seeks to navigate an uncertain global environment and achieve its goal of becoming a ‘Viksit Bharat’ by 2047.
Speaking at a conference of finance ministers and finance secretaries from states and Union Territories organised by the Union Finance Ministry on Friday, Kotak said closer coordination between the Centre and states would be important for India to withstand challenges arising from changing global economic conditions.
He said India’s standing in the global economy remains strong, but warned against becoming complacent in the face of evolving geopolitical and economic risks.
Global power shifts pose new challenges
drew a comparison between the historical expansion of the East India Company and the growing influence of large global technology companies and major economic powers.
According to Kotak, changing global dynamics could create challenges for national sovereignty and economic independence. He said India therefore needs to strengthen its domestic economic capabilities while remaining integrated with the global economy.
He outlined seven broad areas that India should focus on, including fiscal consolidation, strengthening the financial system, using global crises as opportunities for reform, increasing domestic production, addressing gold imports, balancing regulation with development and encouraging creative destruction in businesses.
India needs tighter fiscal management
On fiscal policy, Kotak stressed the importance of moving towards greater fiscal discipline. He pointed out that India’s consolidated fiscal deficit remains above 7%, compared with around 6% in the US.
“Excessive financialisation early in the life of a developing country towards development is something India needs to be careful about,” he said.
He said stronger fiscal management would help improve the resilience of the Indian economy and create greater room to respond to future global shocks.
“We as Indians need to create leverage where we produce things, goods, and services which the world wants from us,” he said, citing the potential for India to become a major exporter of products such as flowers.
Kotak also emphasised the need to reduce India’s reliance on imports and expand domestic production. India, he said, should focus on creating goods and services that are competitive enough for global markets and that the rest of the world wants to purchase.
Gold wealth needs to be put to productive use
Kotak also highlighted India’s substantial household holdings of gold and the impact of gold imports on the country’s external accounts.
He said there is a need to find ways of bringing household gold wealth into more productive economic use while also addressing the challenges posed by gold imports to India’s current account.
Regulation must support financial stability and growth
The veteran banker also called for a balance between financial regulation and economic development.
He said regulators need to safeguard financial stability, but should avoid creating unnecessary restrictions that could hinder growth and innovation. According to Kotak, India’s regulatory framework needs to support development while maintaining the stability of the financial system.
Businesses must embrace innovation and change
Kotak also urged traditional businesses to adapt to technological change and embrace innovation, including developments in artificial intelligence.
He argued that creative destruction is an essential part of economic transformation, with businesses needing to evolve as technology, consumer preferences and competitive conditions change.
For India to progress towards its 2047 development target, Kotak said the country would need stronger domestic capabilities, disciplined public finances, deeper financial-sector strength and an ability to adapt to rapidly changing global conditions.