Boost domestic savings to lower cost of capital

The Economic Survey on Thursday called for policies that raise India’s domestic savings and make manufacturing more competitive, arguing that these are critical to lowering the country’s cost of capital and reducing overreliance on foreign sources of funding.

- Shayan Ghosh

India's high cost of capital is widely recognized.

(ISTOCKPHOTO)

According to the Economic Survey for 2025-26, India’s relatively high cost of capital is recognized as a constraint on private investment and growth. It said that between 1995 and 2025, India’s weighted average long-term interest rates averaged 7.6%, far above the average long-term rates seen in economies such as Canada (3.1%), Italy (2.9%), and Switzerland (1%).

But India has maintained a favourable average long-term interest rate than other emerging economies such as Indonesia (14.1), Mexico (11.05) and South Africa (9.08).