New Delhi : Union Finance Minister Nirmala Sitharaman emphasized the critical role of private capital in driving sustainable development during her keynote address at the 4th International Conference on Financing for Development (FFD4), organized by the United Nations in Seville, Spain. Leading an official Indian delegation on a three-nation visit to Spain, Portugal, and Brazil from June 30 to July 5, Sitharaman outlined a comprehensive seven-point strategy to mobilize private capital, addressing global investment challenges and offering insights from India’s transformative economic reforms. Her remarks underscored the urgent need to bridge the financing gap in critical sectors like education, health, and climate change, while fostering inclusive and resilient economic growth.
The Catalytic Role of Private Capital
Sitharaman described private investment as a “catalytic force” that unlocks capital, boosts productivity, fosters innovation, and introduces technological rigor—elements essential for inclusive and sustainable economic growth. Speaking at both the FFD4 and the Leadership Summit of the International Business Forum in Seville, she highlighted the growing importance of private capital amid volatile foreign direct investment (FDI) flows and global uncertainties. “Mobilizing private capital is not merely a financing strategy—it is a development imperative,” she stated, referencing the Compromiso de Sevilla, a shared commitment to coordinated action and thoughtful regulation to ensure private investment drives resilient growth.
The United Nations Conference on Trade and Development (UNCTAD) estimates an annual investment gap of US$2.5 trillion in critical sectors such as education, health, and climate change. Low- and middle-income countries, in particular, receive a disproportionately small share of private capital, underscoring the need for targeted efforts to overcome investment barriers and align financial flows with development priorities. Sitharaman’s seven-point strategy addresses these challenges by combining robust domestic reforms with strengthened international cooperation, drawing on India’s own experiences to offer actionable solutions.
Seven-Point Strategy to Mobilize Private Capital
Sitharaman’s seven-point strategy is a multi-pronged approach designed to transform the global investment landscape, particularly for Emerging Markets and Developing Economies (EMDEs). Each point addresses specific barriers to private capital mobilization, offering practical and achievable solutions.
1. Strengthening Domestic Financial Markets
The foundation of investment lies in strong domestic financial markets, Sitharaman noted. India has prioritized strengthening its banking system and deepening capital markets to finance large-scale infrastructure and industrial projects. Regulatory frameworks have evolved to balance investor protection with innovation and flexibility, creating a conducive environment for long-term investment. These reforms have positioned India as a model for other nations seeking to enhance their financial ecosystems to attract private capital.
2. Addressing Perceived Risks Through Institutional Reforms
Emerging economies often face high risk perceptions, which increase financing costs and deter investment. India has tackled this challenge by establishing independent regulators, implementing transparent bidding processes, standardizing contracts, and improving the ease of doing business. These institutional reforms have significantly enhanced investor confidence and reduced transaction costs, making India a more attractive destination for private capital. Sitharaman emphasized that such measures are critical for reducing perceived risks and fostering a stable investment climate.
3. Creating Scale in Investment Opportunities
A well-prepared, de-risked, and investment-ready project pipeline is essential for attracting private capital. Sitharaman highlighted India’s renewable energy transformation as a success story, noting that the country’s installed solar capacity grew from 2.8 GW in 2014 to over 110 GW today. This achievement was driven by clear national targets, streamlined procurement processes, and government-backed risk mitigation measures. The model has attracted institutional investors, including pension and sovereign wealth funds, demonstrating the importance of creating scalable investment opportunities.
4. Scaling Up Blended Finance
Blended finance, which leverages public and concessional finance to de-risk private investment, is a key tool for addressing market failures and channeling commercial capital into priority sectors like climate, health, education, and gender equality. Sitharaman advocated for the use of innovative financial instruments such as sovereign green bonds, thematic bonds, and impact investment tools. For maximum impact, these models must be transparent, measurable, and tailored to local contexts, ensuring they effectively support sustainable development goals.
5. Strengthening the Role of Multilateral Development Banks and Development Finance Institutions
Multilateral Development Banks (MDBs) and Development Finance Institutions (DFIs) must play a stronger enabling role in mobilizing private capital. Many sustainable development projects lack initial commercial viability, deterring early-stage private investment. MDBs and DFIs can bridge this gap through concessional finance, guarantees, credit enhancements, and project preparation support, improving risk-return profiles and attracting private capital. Sitharaman emphasized the unique position of these institutions to drive sustainable investment in EMDEs.
6. Reforming International Credit Rating Methodologies
Current international credit rating methodologies often understate the structural strengths and long-term resilience of EMDEs, Sitharaman argued. For instance, India’s sustained high growth trajectory and sound fiscal management are not fully reflected in its sovereign ratings, leading to higher financing costs. Reforming these methodologies would enhance fairness, reduce financing costs, and unlock greater volumes of private investment. Sitharaman called for early, structured engagement between MDBs and credit rating agencies to recalibrate risk assessments and facilitate sustainable capital flows.
7. Unlocking Capital at the Grassroots Level
Supporting micro, small, and medium enterprises (MSMEs) is critical for inclusive growth. These enterprises require access to credit, technology, and capacity-building, along with simplified compliance frameworks. India’s initiatives, such as credit guarantees, stress-period financing, and E-Commerce Export Hubs, have improved MSME creditworthiness and integration into global value chains. Sitharaman highlighted the importance of unlocking capital at the grassroots level to empower underserved groups, including women-led MSMEs and rural communities.
Challenges Facing Emerging Economies
Sitharaman identified several key challenges that hinder private capital mobilization in emerging economies. These include high capital costs, a shortage of bankable projects, regulatory and institutional constraints, limited local capacity, and high perceptions of risk—both country-specific and currency-related. Despite recent growth in private investment, supported by innovative financial instruments and traditional sources, the mobilization of private capital remains significantly below what is required. Low- and middle-income countries, in particular, struggle to attract sufficient investment, necessitating urgent and targeted efforts to overcome these barriers.
India’s Strategic Vision and Global Leadership
Sitharaman’s address at the FFD4 and the International Business Forum reflects India’s strategic vision for sustainable development and global leadership in mobilizing private capital. Her delegation’s three-nation visit, which includes attending the BRICS Finance Ministers and Central Bank Governors Meeting (FMCBG), underscores India’s commitment to international cooperation. The Compromiso de Sevilla serves as a guiding framework for coordinated action, ensuring that private investment becomes a force for inclusive, sustainable, and resilient growth.
India’s participation in global initiatives aligns with its broader maritime and economic strategies, such as the Security and Growth for All in the Region (SAGAR) vision and the Indo-Pacific Oceans Initiative (IPOI). These initiatives emphasize capacity-building, humanitarian outreach, and adherence to maritime rule of law, reinforcing India’s role as a responsible global stakeholder.
Quad-at-Sea Ship Observer Mission: A Parallel Development
In a related development, the Indian Coast Guard, alongside the United States, Australia, and Japan, launched the first-ever Quad-at-Sea Ship Observer Mission on June 30, 2025. The mission, announced under the 2024 Wilmington Declaration, aims to strengthen maritime security and interoperability in the Indo-Pacific region. Two officers, including women officers from each country, have embarked on the US Coast Guard Cutter (USCGC) Stratton, currently sailing to Guam. This unprecedented collaboration enhances joint readiness, operational coordination, and domain awareness, supporting a free, open, inclusive, and rules-based Indo-Pacific.
India’s participation in the Quad mission complements its strategic maritime vision, emphasizing respect for sovereignty, territorial integrity, and peaceful dispute resolution under international laws. The mission, announced at the Quad Leaders’ Summit in September 2024, comes at a time when China is seeking to expand its influence in the Indo-Pacific through military bases and strategic concessions from vulnerable states.
Conclusion: A Call for Coordinated Action
Finance Minister Nirmala Sitharaman’s seven-point strategy offers a roadmap for mobilizing private capital to achieve sustainable development goals. By addressing systemic barriers, leveraging innovative financial tools, and fostering international cooperation, her plan aims to bridge the US$2.5 trillion investment gap in critical sectors. India’s experience, from its renewable energy transformation to MSME empowerment, serves as a model for other nations. As global uncertainties persist, Sitharaman’s call for coordinated action, thoughtful regulation, and shared ambition provides a clear path forward for inclusive and resilient economic growth.
Frequently Asked Questions (FAQs)
1. What is the seven-point strategy proposed by Finance Minister Nirmala Sitharaman?
The seven-point strategy, presented at the 4th International Conference on Financing for Development (FFD4) in Seville, Spain, on June 30, 2025, aims to mobilize private capital for sustainable development. It includes strengthening domestic financial markets, addressing perceived risks through institutional reforms, creating scalable investment opportunities, scaling up blended finance, enhancing the role of Multilateral Development Banks (MDBs) and Development Finance Institutions (DFIs), reforming international credit rating methodologies, and unlocking capital for micro, small, and medium enterprises (MSMEs) at the grassroots level.
2. Why is private capital important for sustainable development, according to Sitharaman?
Sitharaman described private capital as a “catalytic force” that unlocks capital, boosts productivity, fosters innovation, and introduces technological rigor. It is essential for inclusive and sustainable economic growth, helping to bridge the US$2.5 trillion annual investment gap in critical sectors like education, health, and climate change, as estimated by UNCTAD.
3. How has India implemented these strategies domestically?
India has strengthened its banking system and capital markets, established independent regulators, implemented transparent bidding processes, and improved ease of doing business. Its renewable energy sector grew from 2.8 GW of solar capacity in 2014 to over 110 GW today, supported by clear targets and risk mitigation. Initiatives like credit guarantees and E-Commerce Export Hubs have also enhanced MSME creditworthiness and global integration.
4. What role do Multilateral Development Banks (MDBs) and Development Finance Institutions (DFIs) play in the strategy?
MDBs and DFIs are crucial for bridging the gap in sustainable development projects that lack initial commercial viability. They provide concessional finance, guarantees, credit enhancements, and project preparation support to improve risk-return profiles and attract private capital, particularly in emerging markets and developing economies (EMDEs).
5. Why does Sitharaman advocate for reforming international credit rating methodologies?
Current sovereign credit ratings often understate the structural strengths and long-term resilience of EMDEs, like India, leading to higher financing costs. Reforming these methodologies would enhance fairness, reduce costs, and unlock greater volumes of private investment, enabling sustainable capital flows to support development priorities.
