CEA Anantha Nageswaran exhorts private sector to begin investment

Private sector capital expenditure needs to make a comeback for rebalancing the Indian economy towards investment and manufacturing - from a consumption driven one - V Anantha Nageswaran, India’s Chief Economic Advisor (CEA) said Thursday.

“Balance sheets have been largely repaired both in the financial sector and the corporates. The gross savings of the private non-financial companies or corporates have doubled in the last eight years,” he said while addressing the Global Economic Policy Forum 2023 organized by the Confederation of Indian Industry (CII). According to Nageswaran, gross savings of the private corporates have doubled during fiscal 2013-14 to 2021-22 from Rs 10.8 lakh crore to Rs 22 lakh crores. Further, the corporate resources balance, which was negative from fiscal 2012-13 to 2019-20 (as should normally be the case), has turned positive.

“This means the corporate sector has been, relatively speaking, conserving its resources rather than investing,” he said while pointing out that there is a need for private sector players to begin their investment cycles.

According to the CEA, onus of ensuring that the rebalancing happens as it did in the first decade of the millennium is to be shared between private sector companies and the financial sector through providing them resources.

"The corporate sector without even depending on financial resources from the capital markets or from the financial institutions have enough of their resources to make these investments and get the rebalancing happening," he said.

Commenting on the fears regarding global uncertainty, Nageswaran said the situation is likely to remain the same. “Whether we like it or not, this is going to be a decade of uncertainty,” he said while adding, “The Indian corporate sector has to accept uncertainty for the rest of the decade and actually start to invest. Waiting for demand to arise before they start investing will be to delay the onset of such demand conditions happening.”

He explained that rising consumption is an outcome of investment which leads to employment. “Income generation leads to consumption and then the savings is recycled back to investment,” he said and insisted that delays by the corporate sector in materialising investments will break the virtuous cycle of employment generation, income growth and consumption leading back to more savings and investment.