Private investment to pick up: CEA Krishnamurthy V Subramani...| MENAFN.COM

Monday, 24 January 2022 01:34 GMT

Private investment to pick up: CEA Krishnamurthy V Subramanian


(MENAFN- Trend News Agency)

The CIC rose just 4.9% until November 12 this fiscal, compared with 13.5% and 6.2% in the corresponding periods of FY21 and FY20, respectively.

The long-elusive private investment is gathering pace and would see a spurt once the pandemic-induced uncertainties subside considerably, chief economic adviser (CEA) Krishnamurthy V Subramanian told FE in an interview.

Companies have deleveraged, cut costs and recorded profitability, partly aided by a much-needed corporate tax rate cut just months before the pandemic struck. So, their ability to start fresh investments remains strong, Subramanian said.

However, it's also a“simple fact” that in times of great uncertainties, private investments take a knock, as firms adopt a wait-and-watch approach. But there is further scope for improvement, he explained. Gross fixed capital formation grew 11% in the September quarter, aided by a conducive base (it was -8.6% a year before).

Meanwhile, private consumption, the most critical pillar of the economy, has grown this fiscal even when spending avenues remained limited due to localised curbs, he said.

“During the second wave, although shopping establishments like malls, etc were shut, private consumption still grew 19.3% (in the June quarter), albeit on a low base. In the September quarter, it grew 8.6%. The fact that it grew despite supply constraints shows consumption demand is coming back,” he said.

As manufacturing remains strong and the services sector gains momentum with greater headway in the vaccination drive, as reflected in the Purchasing Managers' Index, private consumption, too, will get further boost in the coming months, the CEA said. In fact, India's manufacturing growth over a five-year period (through 2019) pipped China's for the first time since 1990s, he added.

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