Equity of private sector companies at an aggregate level gets created only through two ways : 1. From whatever the govt spends over the years ( but not all of it) 2. From a net current account surplus

But not all what govt spends as deficits creates equity for the private sector.
In general say spending on infrastructure creates much more larger "equity" for private sector ( say by giving contracts and stuff) assuming ofcourse that bulk of profits get reinvested into business

Revenue spending (on wages subsidies etc) essentially creates household income, which can create household savings or result in consumption. The savings part of households, so longer as it is invested in bank deposit like instruments, do not end up creating "equity" capital

The consumption part essentially adds to the equity capital of the corporate sector on aggregate, once you subtract for various costs incurred by the companies towards wages, interest and on imports ( again, all on aggregates).

The other way equity capital can get created at an aggregate level in the economy is ofcourse if banks "write off" loans. The flip side of that is ofcourse that the bank itself would need recapitalization to that extent, and would to that extent either imply govt spending or

household savings being channelized as equity capital into the bank.

At an economy level, the household savings is ofcourse implicitly available as equity/risk capital for the private corporate sector. However in the absence of well functioning markets, it is unlikely that the savings would be used that way.

Put it another way, the distribution of such household savings and wealth matters and to that extent incomes also matter.

To explain with an example, a person with 100 cr of wealth is probably more likely to start a business than somebody with 1 cr of wealth and even more so

than somebody with 1 lakh of wealth.

This does not mean ofcourse that every one with 100 crore of wealth will start a business. Some may prefer just coasting with that wealth, other might not start one in India and prefer to move that money offshore etc.

Now consider a country starting with a low per capita income and low "stock" (and flow) of household savings, typically the starting point for most developing countries when they first became a country to several years after independence.

Most of that household wealth ( except with a few wealthy barons) is likely also invested in likes of bank deposits. The "equity"/risk capital available domestically is limited to that which those wealthy barons are willing to deploy ( not all will either)

Mind you the domestic demand is also likely low given per capita incomes, so the only reason why the wealthy would invest, is if they see that they can export and compete with others. Ofcourse that is also what would build further "equity" capital in aggregate.

The other way ofcourse would be to encourage foreign investors to invest initially to build part of that risk capital. Again in the absence of an ability to export, given a poor country, the number of foreign investors doing that might be low.

Then there is another challenge for such a country, that of the govts ability to borrow. In theory that is not constrained as it can print and spend any amounts but print and spend would eventually lead to leakage in the form of capital outflows.

So the govt also needs to be able to demonstrate its ability to tax citizens so that it is able to keep its debt under a semebelance of control that people will domestically be willing to hold on to it.

This demonstration of ability to tax citizens is probably THE MOST important demonstration of state capacity ( ofcourse the rates need to be reasonable and all that)

So essentially, such a state with low PCI and low household wealth at independence has a few choices
1. Tailor policies to develop export champions
2. Give extensive sops to foreign cos to invest
3. Ask for foreign aid
4. Create state owned companies

In case of 1), you would need to implicitly be a suit boot ka sarkar ( I am not using that term pejoratively here). But you need to make sure the capitalists are kept happy. Also apart from that, they themselves need to be confident to compete in global markets.

Though not completely under your control, you probably also want that capital and wealth to be somewhat diffused among the capitalists themselves ( so that one or two of them cannot turn rogue and gain complete control ) , yet