Gandhinagar: India needs $800 billion ( ₹ 50 trillion) annually if the economy is to grow at 7%, financial services secretary Hasmukh Adia said on Monday.
Noting that last year fund inflows from all traditional channels of FDIs (foreign direct investments), ECBs (external commercial borrowings), FIIs (foreign institutional investors) and domestic capital was way below $200 billion, he said that government, planners and the industry would have to find alternative sources for this huge amount to finance growth.
“If the economy is to grow at 7%, given a nominal inflation of 5-7%, and a credit-to-GDP multiple of 1.3%, the average growth rate in financing will have to be 18%. In terms of numbers it comes to $800 billion per year," he said at the Vibrant Gujarat Summit.
While $130 billion came from domestic financial institutions and banks, $13.4 billion came from foreign institutional investors, FDI was worth $21.6 billion and $32 billion came through the ECB route, he said.
He said debt inflows through FPIs (foreign portfolio investors) is in the range of minus $4.6 billion last year and the highest was $9 billion in FY2012. “So, that is something that we cannot depend on," he said.
He also said that against an annual requirement of $800 billion net foreign institutional investments and net FDI investments were only about $35 billion last year. The ECB component was $32 billion.
“Put together, we had about $70 billion dollar coming into the country. There is a huge gap in financing and going by this figure, I would think we cannot solely depend on FDI and FPIs for funds but we will have to develop internal sources of funding) and that’s where the challenge is," he said.