Parliamentary panel calls for hike in investment rate to 35 per cent of GDP to achieve 8 per cent growth

The Parliamentary Standing Committee on Finance has called for increasing the investment rate to approximately 35 per cent of GDP, up from the current 31 per cent, to achieve the growth target of 8 per cent annually. In its report tabled in the Rajya Sabha on Tuesday, the committee said that this financing may result in higher levels of Current Account Deficit, which is challenging under prevailing global circumstances.

The panel, headed by BJP leader Bhartruhari Mahtab, emphasised the need for domestically led growth. The committee noted the collaborative approach of the deregulation task force, chaired by the Cabinet Secretary, which fosters dialogue with states to adopt best practices in land, labour, capital, and regulatory reforms.

“This model of cooperative federalism can streamline business processes and foster an investor-friendly environment,” the report stated.

Former Department of Economic Affairs Secretary Ajay Seth, in comments made to the committee in June, reinforced that “deregulation is important to drive growth and create jobs.”

To address fiscal challenges, the committee recommended tailored fiscal reforms for highly indebted states to strengthen their financial health while preserving their ability to invest in critical infrastructure and social development. It also stressed the need for sustained fiscal discipline at the sub-national level and proposed setting up a mechanism to reduce the debt-to-GDP ratio to recommended levels, ensuring long-term macroeconomic stability and equitable growth.

The report comes in the context of the 2025-26 Union Budget, which shifted focus from fiscal deficit targeting to a debt-to-GDP ratio target of 50 per cent by March 2031. A 100-basis-point flexibility band has been allowed. With the current debt-to-GDP ratio at 57.1 per cent in FY25, an average annual reduction of 122 basis points will be required to meet the 49-51 per cent target range.

Overall, the committee’s recommendations signal a strategic push for structural reforms and fiscal prudence to position India as a robust, investment-driven economy.