Capital Markets: The Missing Piece in India’s Growth Story

In this episode, journalist and author Puja Mehra speaks with economist Dr. Jahangir Aziz, Economist (Head Emerging Market Economics) at JPMorgan and a former finance ministry official, about what India’s upcoming Union Budget can realistically achieve amid slowing nominal growth and weak private investment. They discuss how the government’s commitment to fiscal consolidation shapes budget choices, even as tax revenues soften and demand remains constrained. Drawing on recent fiscal outcomes, inflation trends, capital market dynamics, and historical episodes such as the global financial crisis, Aziz explains why India’s investment slowdown is no longer cyclical but structural. He unpacks the widening disconnect between strong headline growth and persistently low core inflation, arguing that sustained disinflation signals excess capacity, weak pricing power, and a chronic shortfall of demand. The conversation examines why corporate investment has stagnated for over a decade, how rising industry concentration and limited sectoral churn are dampening incentives to invest, and the role underdeveloped corporate bond and private credit markets play in constraining medium-term financing for firms. Aziz also assesses the limits of budgetary action, the risks of an increasingly intrusive regulatory approach to capital markets, and the implications of slowing nominal GDP for earnings, debt dynamics, and fiscal space. The discussion concludes with reflections on why focusing narrowly on fiscal prudence and “Goldilocks” narratives risks overlooking deeper structural constraints to growth. Tune in for insights on what India’s macroeconomic signals reveal about demand, investment, market concentration, and the policy challenges that lie beyond budget day.

(00:00) Introduction

(00:27) Fiscal deficit and budget strategy

(02:57) Customs duties and tariff constraints

(05:10) Deregulation beyond the budget

(07:30) Capital markets and lack of reform

(11:52) Lessons from the 2008 crisis

(14:57) Corporate credit and market failures

(19:57) Nominal GDP growth concerns

(23:11) Explaining economic slack simply

(26:22) Investment slowdown and policy limits

(29:10) Structural causes of weak investment

(33:14) Industry concentration and ministries’ role

(34:40) Closing remarks

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