US deal could spur further liberalisation

India's economic growth is maintaining its momentum, according to economist and 16th Finance Commission chairman Arvind Panagariya. Gross foreign direct investment figures have remained robust, with $93-94 billion recorded for 2025-26, representing solid growth. While concerns have been raised about declining net foreign investment, Panagariya attributes this to the cyclical nature of private equity investments and increased outbound investment by Indian entities abroad, which he characterizes as a positive development that expands India's international footprint.

To sustain this growth trajectory, Panagariya has outlined several key strategies. He emphasizes the need for deeper trade liberalization, increased privatization, and structural reforms in the judiciary and energy sectors. Attracting more long-term productive investment remains critical, particularly through enhanced private equity flows. Panagariya identified trade agreements with the UK and European Union as impactful deals, with expectations that the EU agreement will deliver particularly significant results.

Panagariya, who is the Jagdish Bhagwati Professor of Indian Political Economy at Columbia University, believes potential US deals could further catalyze economic liberalization. These agreements, combined with the broader reform agenda, are positioned as instrumental in maintaining India's economic momentum and attracting sustained foreign investment.