Why the principal secretary to the Prime Minister feels India can't be complacent despite strong economic fundamentals

India's economy may have been able to withstand the various crises, from the pandemic to the West Asia crisis, but one can't remain complacent and needs to be aware of risks that can unfold despite our macroeconomic fundamentals, Pramod Kumar Mishra, the principal secretary to the Prime Minister of India, said on Wednesday.

"We need to be conscious of the risk we face, particularly from global developments. Alliances are fragmented, supply chains are being used as weapons, capital can be switched on and off trade barriers are rising again. We cannot count on a friendly tailwind," Mishra said.

Speaking during the SBI Banking and Economics Conclave, he also stressed the need to make more in India and competitively. "We have a significant merchandise trade deficit," he pointed out.

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The journey, he said, must move from Make in India to Design in India, Innovate in India and then Lead from India.

Efforts were being made to improve manufacturing performance and skilling of young people, according to Mishra.

He called on the banking and financial services industry to not just fund next year's growth but finance the next generation of Indian enterprise.

"It is to finance the capabilities that will define India's place in the world. It is to convert India's scale into prosperity, its potential into capability and its economic strength into leadership," Mishra noted.

India's financial system will need to mobilise large amounts of capital for infrastructure, manufacturing, urbanisation, energy transition and innovation, he stressed.

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But he also urged lenders to move from collateral to cash flows. He feels technology can help banks assess businesses on parameters like GST returns, payment flows, etc.

"This is not an argument for lower standards of credit appraisal. It is an argument for better information and better credit appraisal," said Mishra.

During the speech, he also highlighted the efforts made over the past decade to clean up the bank balance sheets.

" Finance cannot support sustained investments when the institutions providing that finance are themselves carrying the burden of past misallocation of capital," Mishra noted.