Cannot rest on tailwinds, have to be conscious of risks, says PM's Principal Secretary

India must remain vigilant of geopolitical risks and prepare for economic adjustments, according to Pramod Kumar Mishra, the Prime Minister's Principal Secretary. At the State Bank of India (SBI) Banking & Economics Conclave, Mishra highlighted four main global risks India faces: fragmented alliances, reliance on imports, pressure on the nation's external accounts, and rapid advancements in artificial intelligence.

Mishra emphasized that India's recent handling of the pandemic, the Ukraine war, and the West Asia crisis does not grant complacency. He underscored the vulnerability of supply chains and capital, which can be quickly shifted in response to geopolitical events and trade barriers. India cannot depend on positive external factors, and it must instead focus on domestic manufacturing and competitiveness.

The principal secretary also addressed the need for improved manufacturing performance and skill development for young people. In response to external pressures on the external account, Mishra stressed the importance of attracting foreign direct investment by ensuring stable tax policies, clear contracts, and reliable logistics. Additionally, he called for the development of artificial intelligence, as its full potential remains uncertain.

Mishra outlined India's requirement to mobilize substantial capital over the next two decades for infrastructure, manufacturing, energy transition, enterprise, and innovation. He suggested that assets with long gestation periods need long-term capital, while highly growth enterprises require equity, and infrastructure projects need patient capital. Cities will demand specialized financial structures to accommodate these diverse financing needs.

He further highlighted that the financial system should transition from merely supporting growth to enabling it. India must mobilize significant capital for various endeavors, and the corporate bond market's depth should not be viewed separately from the health of bank lending. A larger and more sophisticated economy will require a blend of banks, bond and equity markets, institutional investors, infrastructure funds, and efficient channels to convert domestic savings into productive investments.

Mishra reminded the audience of the importance of evaluating credit based on the economic viability of projects rather than momentary enthusiasm, as a means of safeguarding against excessive lending, stressed assets, and subsequent clean-ups.