India should be aware of the risks which could unfold: PK Mishra, Principal Secy to PM

PK Mishra, Principal Secretary to the Prime Minister, addresses the 13th SBI Banking and Economics Conclave via video conference as State Bank of India Chairman Challa Sreenivasulu Setty looks on, in Mumbai on Wednesday
| Photo Credit:
KUNAL PATIL

PK Mishra, Principal Secretary to the Prime Minister, warned that India must not become complacent despite withstanding risks from crises like Covid-19, the Russia-Ukraine war, and the West Asia conflict.

He emphasized that the nation must remain vigilant about potential risks, even with strong macroeconomic fundamentals and stable economic growth.

What’s happening across

Mishra noted, “Alliances are fragmenting, supply chains are being weaponized, capital flows can be toggled on or off, and tariff and non-tariff trade barriers are rising again. We cannot rely on a friendly tailwind.”

Highlighting the significant merchandise trade deficit, he stressed the need to manufacture goods domestically and competitively, alongside improving manufacturing performance and youth skilling, at the State Bank of India’s annual banking and economics conclave in Mumbai on Wednesday.

Referring to the pressure on the country’s external accounts amid fickle capital flows, Mishra underscored the need to focus on foreign direct investment, which requires stable tax policies.

Regarding artificial intelligence, Mishra remarked, “We do not yet know its full shape. We need to prepare for it. These and other challenges are realities. The Indian government is fully aware of the challenges. I am sure financial institutions are also conscious of the urgency to meet these and other emerging challenges.”

Financing requirement

For three decades, discussions around Indian finance have largely centered on financial deepening—more accounts, branches, credit, and inclusion. Mishra observed that the financial system must now shift from “accommodating growth” to “enabling growth”.

He noted that India must mobilize substantial capital over the next two decades for infrastructure, manufacturing, urbanization, energy transition, enterprise, and innovation.

“Assets with long gestation periods require longer-term capital; innovation needs risk capital; high-growth enterprises need equity; infrastructure demands patient capital; and cities require new financial structures. Thus, the depth of the corporate bond market is intrinsically linked to the health of bank lending—they are two sides of the same financing coin,” he said.

Role of banks

Mishra stressed that banks will remain central to the system. However, a larger, more sophisticated economy cannot be financed by banks alone.

“We require strong banks alongside deeper bond and equity markets, larger institutional investors, infrastructure funds, and a more efficient channel to convert domestic savings into productive investment.”

He stated that the financial sector’s task extends beyond financing next year’s growth. “It involves financing the next generation of Indian enterprise, building the capabilities that will define India’s global standing, and converting India’s scale into prosperity, its potential into capability, and its economic strength into leadership. This is the journey from an emerging to a leading economy,” he added.

Mishra asserted that credit must be appraised based on a project’s economics rather than momentary enthusiasm, offering protection against cycles of excessive lending, stressed assets, and subsequent clean-ups.

He also advocated for evaluating businesses based on their earnings and future potential rather than primarily on the assets their promoters already possess.

“This is not an argument for lowering credit appraisal standards, but for better information and improved credit appraisal. This is especially crucial for first-generation entrepreneurs, asset-light service exporters, and small enterprises whose creditworthiness lies in the business itself rather than the family balance sheet,” Mishra said.

Published on September 23, 2026