India must focus on boosting investment, savings, and entrepreneurship while undertaking structural reforms to sustain long-term economic growth, Niti Aayog vice chairman Ashok Lahiri said on Thursday.
Addressing the NCAER’s India Policy Forum 2026, Lahiri stressed that economic growth depends on expanding productive capacity.
“Much of new technology is embedded in machines. Application of additional capital is critical for reaping the benefits of modern technology and supporting growth,” he said, citing the high investment rates maintained by Japan, South Korea, Singapore, and China during their rapid development phases.
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Comparing India’s performance with East Asian economies, Lahiri noted that while India’s gross fixed capital formation has remained below 30% of GDP for most years, the country has used capital relatively efficiently. However, he cautioned against complacency, saying, “The Incremental Capital-Output Ratio (ICOR) is a crude measure of efficiency and has several deficiencies.”
Highlighted the importance of domestic savings in financing investment, he said, “the solution is not in saving less, but in saving more, and efficiently intermediating that saving to the most promising sectors.” He pointed out that India’s savings rate, though recovering to 35% in 2025, still trails China’s by a significant margin.
Rejecting concerns that higher savings would weaken demand, Lahiri argued that even investment creates aggregate demand and is essential for bridging India’s technological gap with advanced economies.
Calling for structural reforms, he identified land acquisition hurdles, capital market imperfections, and ease of doing business as major barriers to private investment. He added that public infrastructure spending now complements private investment by “crowding it in” rather than crowding it out.
Highlighting India’s emerging innovation ecosystem, Lahiri praised private space startups and technology firms such as Skyroot Aerospace, saying they demonstrate the country’s growing entrepreneurial strength.
“Let us make India the most attractive location for running a successful business and making profit,” he said, adding that “investment, both domestic as well as foreign, will flow in search of profit.” He urged removal of barriers and create conditions for plentiful investment and adequate savings to achieve the goal of Viksit Bharat by 2047.
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