Panagariya additionally advocated creating an unbiased privatisation ministry to speed up the federal government’s disinvestment agenda, because the Division of Disinvestment has been unable to take care of the tempo of privatisation.
“I firmly consider that, no matter fiscal pressures, the privatisation of PSUs and most public sector banks is integral to our financial reforms,” he instructed PTI in an interview.
Panagariya mentioned aggressive PSU and financial institution privatisation ought to proceed whatever the West Asia disaster and geopolitical uncertainties.
“Modernisation of the financial system as part of our India@2047 motion, we have to resuscitate the PSU and PSB privatisation,” he mentioned.
Underneath Panagariya, the then NITI Aayog vice chairman, the federal government suppose tank had pursued the thought of disinvestment of PSUs. NITI Aayog’s privatisation program was launched in 2016.
When requested whether or not he finds it odd that capital is leaving a rustic (India) experiencing development charges of 6-7 per cent, a lot larger than wherever else on the planet, he defined that the gross FDI has been performing extraordinarily nicely, because it rose from USD 71.3 billion in FY24 to USD 80.6 billion in FY25 and USD 94.5 billion in FY26.”Clearly, overseas traders proceed to see the long-run productiveness of investments in India very positively,” Panagariya, presently a professor of economics at Columbia College, mentioned.
He defined that overseas traders withdraw a portion of the previous gross FDI in any given yr.
“A big a part of gross FDI into India has come within the type of personal fairness. Sooner or later, these traders determine to exit these investments. Usually, this occurs when the privately-owned agency goes public by way of an IPO. Up to now two years, IPO exercise in India has accelerated, resulting in more-than-usual exits by private-equity traders,” the Chairman of the sixteenth Finance Fee mentioned.
Additionally, in response to him, within the final two years, FDI by Indian corporations overseas have additionally accelerated, which has resulted in some outflow of capital from the nation.
“If it is a short-term phenomenon, we now have nothing to fret about concerning outflows. If it’s a long-term pattern, it is a superb improvement. For it signifies that Indian corporations are reaching a excessive diploma of maturity as they’re spreading their wings overseas,” the eminent economist noticed.
Lastly, Panagariya mentioned India has additionally seen overseas portfolio funding (FPI) exit on a considerably bigger scale within the final two years, contributing to {dollars} flowing out.
“By all accounts, Indian equities had change into overvalued, which accelerated the exit. However now a valuation correction has occurred,” he mentioned.
Furthermore, Panagariya mentioned the rupee has seen a major devaluation, making the equities additional cheaper for overseas traders.
“Subsequently, I count on this supply of outflows to settle down in FY27,” he mentioned.
Based on the most recent RBI information, internet FDI inflows stood at USD 7.7 billion in 2025-26, a pointy rise from USD 1 billion in 2024-25, although they remained beneath USD 10.2 billion in 2023-24 and considerably decrease than USD 28 billion in 2022-23.
International portfolio funding (FPI) flows remained risky in the course of the yr, with internet outflows of USD 16.5 billion in 2025-26, pushed primarily by the fairness section.
On the current depreciation of the rupee, he mentioned it could be cheap to suppose that the ‘rupee shouldn’t be overvalued now’, as lots of overvaluation has, little question, been corrected just lately, he mentioned.
The eminent economist mentioned the truth that the rupee was at roughly 48 per greenback in 2002-03 and 47 per greenback 9 years later, in 2011-12, left it massively overvalued in actual phrases on the finish of that interval.
Initially, he mentioned from 2011-12 onward, the correction was gradual, and the rupee remained overvalued regardless of vital nominal depreciation.
“The end result was that India’s merchandise exports fell from USD 310 billion in 2011-12 to USD 260 billion in 2015-16, and solely rose again to USD 320 billion in 2019-20. “I feel we now have now turned a nook by letting rupee depreciation speed up,” the previous NITI Aayog vice chairman mentioned.
Panagariya reiterated that he nonetheless hopes, nevertheless, that the RBI is not going to fall into the psychological lure of refusing to let the rupee cross the Rs 100-per-dollar mark for too lengthy.
As soon as thought-about amongst Asia’s extra steady currencies, the rupee has now change into one of many worst-performing rising market currencies this yr, pressured by a poisonous combine of pricey oil, capital outflows, widening commerce deficits and a surging US greenback.
On below-average forecast for monsoon rains and its influence on inflation, he mentioned over time, India’s reliance on rain has seen a gentle decline.
“Our water reservoirs are in fine condition, and, primarily based on the rise within the space sown over final yr, farmers appear to have taken a usually optimistic view of the scenario. Our buffer inventory can be sturdy,” he mentioned, including that he doesn’t see a compelling motive to be involved on this account.
