Recently, at the 4th International Conference on Financing for Development (FfD 4) in Seville, Spain, Union Finance Minister of India Nirmala Sitharaman proposed a seven-point strategy to mobilize private capital for sustainable, inclusive growth.

About UN FfD 4 Conference

Objective: To create a unique opportunity to reform financing at all levels by supporting international financial architecture reforms and overcoming financing barriers that hinder the critical investment required to achieve the SDGs.

Sitharaman’s 7-Point Strategy to Mobilise Private Capital

• Strengthening Domestic Financial Markets: India has reinforced its banking and capital markets to support large-scale investments, ensuring financial stability.
  • For Example, Establishment of Insolvency and Bankruptcy Code (IBC)
• Reducing Perceived Risks Through Institutional Reforms: Regulatory reforms such as transparent bidding, independent regulators, and standardised contracts have significantly improved investor confidence.
  • For example, India’s successful solar energy auctions under the Solar Park Scheme have attracted major private players like Adani Green Energy.
• Creating Scalable, Investment-Ready Projects: Large-scale, de-risked, and investment-ready project pipelines are essential to attract sustained private capital.
  • The rapid growth of India’s renewable energy capacity from 2.8 GW in 2014 to over 110 GW in 2025 demonstrates how clear national targets and streamlined procurement can attract both domestic and foreign institutional investors.
• Scaling Up Blended Finance Instrument: Blended finance uses public funds to de-risk private investments and direct them toward critical sectors.
  • For example,  India’s issuance of sovereign green bonds and the success of SEBI-regulated social bonds have channelled private capital into climate action, education, and healthcare.
• Strengthening Multilateral Development Banks and Development Finance Institutions: Multilateral banks should take leadership in providing concessional finance, guarantees, and project preparation support to improve commercial viability.
• Reforming Global Credit Rating Methodologies: Current sovereign ratings often undervalue emerging markets, failing to reflect structural strengths and long-term resilience.
• Empowering MSMEs to Mobilise Grassroots Capital: Micro, Small, and Medium Enterprises (MSMEs) are essential for inclusive growth, innovation, and employment.
  • India’s Emergency Credit Line Guarantee Scheme (ECLGS) and MSME-focused digital platforms like E-commerce Export Hubs have improved access to credit and global markets for small businesses.

Role of Private Capital in Development

• Unlocking Large-Scale Investment Resources: Private capital supplements limited public finances and enables big-ticket investments in infrastructure and technology.
  • For example, Private participation in India’s telecom sector (Reliance Jio) revolutionised digital access and connectivity.
• Driving Technological Innovation: Private players can lead frontier technology development and enhance global competitiveness.
  • In space technology, private companies like Skyroot Aerospace and Agnikul Cosmos are pioneering affordable space launch vehicles, supporting India’s vision of a robust private space ecosystem.
• Supporting Sustainable Development Goals (SDGs): Private investment directly contributes to SDGs by financing renewable energy, education, healthcare, and gender empowerment initiatives.
  • Tata Power’s large-scale solar projects and Mahindra Group’s electric vehicle expansion actively support India’s climate and sustainability targets.
• Fostering Inclusive Growth Through Employment: Private sector expansion generates employment opportunities and integrates grassroots entrepreneurship into the global value chain.
  • The Startup India initiative has spurred a wave of private investment in MSMEs, significantly boosting job creation.

Barriers to Private Capital Mobilisation

• High Perceived Investment Risk: Regulatory uncertainties, political risks, and complex dispute resolution mechanisms deter foreign investors.
  • For example,  Vodafone faced a prolonged retrospective tax dispute in India, highlighting regulatory unpredictability and investment risk for foreign companies.
• Limited Blended Finance Adoption: Inadequate use of blended finance instruments restricts the mobilisation of private capital, especially for social and climate projects.
• Unfavourable Sovereign Credit Ratings: Conventional rating methodologies often overlook the growth stability and resilience of emerging markets, raising borrowing costs.
  • For Example, in 2023–24, India’s GDP growth was around 7.6%, far higher than most advanced and emerging economies but India’s credit rating remains BBB- (lowest investment grade) from S&P and Fitch, and Baa3 from Moody’s
• Lack of Bankable, Investment-Ready Projects: Many developing countries struggle to prepare well-structured, de-risked projects that meet international investment standards.

Way Forward

• Institutionalise Blended Finance Models: Countries can adopt best practices such as SDG Indonesia One platform, which successfully pools public and private funds to finance sustainable projects.
• Engage MDBs for Early-Stage Support: Proactively involving Multilateral Development Banks (MDBs) in project design, as seen in African renewable energy initiatives, can significantly improve risk profiles and attract private investors.
• Reform Global Credit Assessment Systems: Collaborative efforts between MDBs and rating agencies can recalibrate sovereign risk assessments, ensuring a fairer evaluation of emerging markets’ creditworthiness, as proposed under the Compromiso de Sevilla.

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