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Sitharaman proposes 7-point strategy to mobilise private capital at UN meet in Spain
FM Nirmala Sitharaman said private investment is a catalytic force
New Delhi: Mobilising private capital is a development imperative, Union finance minister Nirmala Sitharaman on Monday said, proposing a seven-point strategy to achieve this goal, including improved international credit rating methodologies reflecting structural strengths and long-term resilience of emerging economies like India.
“Private investment is a catalytic force -- unlocking capital, boosting productivity, fostering innovation, and introducing technological rigor -- all essential for inclusive, sustainable economic growth,” she said in her keynote address at 4th International Conference on Financing for Development (FFD4) organised by the United Nations in Seville, Spain. Sitharaman is leading an official delegation to Spain, Portugal and Brazil from June 30 to July 5.
In recent years, we have witnessed encouraging growth in private investment, supported by the rise of innovative financial instruments alongside traditional sources, she said. “However, private capital mobilization remains significantly below what is required, with low-and middle-income countries receiving a disproportionately small share. This underscores the urgent need for targeted efforts to overcome investment barriers and better align financial flows with development priorities,” she said.
Allow me to highlight seven strategic areas where transformation is both necessary and achievable -- and where India’s own experience offers useful insights, she said. “First, strong domestic financial markets are the foundation of investment. India has invested in strengthening its banking system and deepening capital markets to finance infrastructure and industry at scale. Our regulatory frameworks have evolved with market needs—balancing investor protection with innovation and flexibility—creating a more conducive environment for long-term investment,” she said.
Second, addressing perceived risks through institutional reforms is crucial. Emerging economies often face high risk perceptions, which raise financing costs and deter investment. India has addressed this challenge by establishing independent regulators, implementing transparent bidding processes, standardising contracts, and improving the ease of doing business. These reforms have significantly enhanced investor confidence and reduced transaction costs.
Third, we must create scale in investment opportunities. The presence of well-prepared, de-risked, and investment-ready project pipeline is critical. India’s renewable energy transformation— from 2.8 GW of installed solar capacity in 2014 to over 110 GW today—was enabled by clear national targets, streamlined procurement, and government-backed risk mitigation. This model attracted institutional investors, including pension and sovereign wealth funds.
Fourth, blended finance must be scaled up. By leveraging public and concessional finance to de-risk private investment, innovative tools such as sovereign green bonds, thematic bonds and impact investment instruments address market failures and channel commercial capital into priority sectors like climate, health, education, and gender equality. For maximum impact, these models must be transparent, measurable and tailored to local contexts, she said.
Fifth, Multilateral Development Banks (MDBs) and Development Finance Institutions (DFIs) must assume a stronger enabling role, she said. “Many sustainable development projects lack initial commercial viability, deterring early-stage private investment. MDBs and DFIs are uniquely positioned to bridge this gap—through concessional finance, guarantees, credit enhancements, and project preparation support—thereby improving risk-return profiles and attracting private capital,” she added.
Sixth, international credit rating methodologies must evolve to better reflect the structural strengths and long-term resilience of Emerging Markets and Developing Economies (EMDEs), she said. “Current sovereign ratings often understate key fundamentals. India, for example, with a sustained high growth trajectory and sound fiscal management, its sovereign rating does not fully reflect its macroeconomic stability. Reforming rating methodologies would not only enhance fairness but also reduce financing costs and unlock far greater volumes of private investment,” she added.
“Despite growing global consensus, actual financial flows to EMDEs have struggled to gain momentum. This underscores the need for early, structured engagement between MDBs and credit rating agencies to recalibrate risk assessments and unlock sustainable capital at scale,” she said.
Her final point revolved around unlocking capital at the grassroots level that required support for micro, small and medium enterprises (MSMEs). “These engines of inclusive growth need access to credit, technology, and capacity-building, along with simplified compliance frameworks. India’s initiatives—ranging from credit guarantees and stress-period financing to E-Commerce Export Hubs—have improved MSME creditworthiness and global value chain integration,” she said.
“Mobilising private capital is not merely a financing strategy—it is a development imperative. With coordinated action, thoughtful regulation, and shared ambition as reflected in Compromiso de Sevilla, we can ensure that private investment becomes a force for inclusive, sustainable, and resilient growth,” she added.
