Structural reforms needed to sustain 7-8% GDP growth for Viksit Bharat, says N.K. Singh

Livemint - Economy · 19 Sept 2026 · 2 min read
Prelims · Economy Mains · GS3 Economy High relevance

Former Finance Commission Chairman N.K. Singh emphasized the need for increased savings, private capital mobilization, and efficient investment allocation to achieve India's 7-8% growth target for Viksit Bharat, highlighting fiscal coordination and productivity improvements.

Key points

Gross Domestic Savings (GDS) currently stand at 34% of GDP, with Singh advocating for an increase to 38-40% to meet investment needs for Viksit Bharat, aligning with historical peaks.

Incremental Capital-Output Ratio (ICOR) has improved from 5 to 4.5 but remains stagnant, indicating inefficiencies in capital allocation that need addressing through better resource distribution and infrastructure.

Fiscal Federalism requires state-specific debt sustainability assessments rather than uniform benchmarks, considering variations in growth, interest costs, and revenue buoyancy, as proposed by Singh.

GST Council Model should be extended to shared infrastructure and urbanization projects, leveraging pooled resources for logistics, transport, and river basin management, enhancing cooperative federalism.

Tax-to-GDP Ratio at 19% presents opportunities for improving compliance through AI and machine learning, utilizing GST turnover, income-tax returns, and customs data to widen the tax base.

Scheme for Special Assistance to States for Capital Investment has increased states' capital outlay from 2.2% to 2.7% of GDP (FY22-FY25), demonstrating the potential for public finance to crowd in private investment.

[GS3-Economy] Cost of Capital in India (10-12.5%) is higher than in Malaysia, Thailand, Vietnam, and Indonesia (6-10%), necessitating reforms in priority-sector lending to include green energy and digital infrastructure.

Way Forward: India should implement state-specific debt sustainability frameworks, enhance GST Council's role in infrastructure pooling, and leverage AI for tax compliance to boost savings and private investment efficiency.

Key terms

Incremental Capital-Output Ratio (ICOR)

ICOR measures the additional capital required to produce an additional unit of output, reflecting investment efficiency. A lower ICOR indicates better productivity. For UPSC, it highlights inefficiencies in India's capital allocation, relevant for GS3 (Economy) questions on growth strategies.

Fiscal Federalism

Fiscal federalism involves the distribution of financial responsibilities and resources between central and state governments. For UPSC, it is crucial for understanding cooperative federalism, GST Council dynamics, and state-specific fiscal policies under GS2 (Polity and Governance).

Tax-to-GDP Ratio

Tax-to-GDP ratio measures tax revenue as a percentage of GDP, indicating the government's resource mobilization capacity. For UPSC, India's 19% ratio underscores the need for compliance improvements and broader tax bases, relevant for GS3 (Fiscal Policy) and GS2 (Governance).

Gross Domestic Savings (GDS)

Gross Domestic Savings (GDS) refers to the total savings by households, private corporations, and government entities within a country. For UPSC, it is critical as it funds investments necessary for economic growth, with India's target of 38-40% of GDP aligning with Viksit Bharat goals and historical benchmarks.