Listed corporate entities are indeed upping their game when it comes to making capital expenditure in the economy, V Anantha Nageswaran, Chief Economic Advisor to the Finance Ministry said on Saturday.

However, unlisted companies’ capital expenditure has not been rising that much, Nageswaran said at the India Banking Conclave 2024, organised by NITI Aayog and Council for International Economic Understanding, in the capital.

He highlighted that Corporate Capital Expenditure grew by robust 14.6 per cent year-on-year in the first half this fiscal to ₹ 4.4 lakh crore (₹ 3.8 lakh crore). In entire 2022-23, private capex (excluding financials) stood at ₹ 7.6 lakh crore. It was ₹ 6.2 lakh crore in 2021-22. 

Need to pick up

At the same time, Nageswaran said that private sector investments have to pick up further speed to ensure employment and income growth keep pace and help sustain the consumption share of GDP at 60 per cent in a decade where global growth is uncertain. 

The fact that India is driven more by domestic consumption is a great insulation for the country in a world that is still beset with uncertainties, he said.

The Centre has in the recent budgets focused on increasing its own capex to give push to economy and the overall allocation for capex has increased from ₹ 2.5 lakh crore to ₹ 10 lakh crore in 2023-24. 

The Centre has in the last three years increased capital investment outlay from 2.15 per cent of GDP in 2020-21 to 2.7 per cent of GDP in 2022-23 and is on course to be above 3 per cent this fiscal.

The Centre’s focus on capex is leading to crowding in of private investments, according to Nageswaran.

His remarks on listed companies upping their game on capital expenditure is significant as it comes at a time when there is a perception that Centre alone was doing the heavy lifting and the private sector —despite their strong balance sheets and deleveraged position— was lagging behind and only looking to invest in a measured way. 

Nageswaran also asserted that the Indian economy was well positioned to record average 7 per cent growth levels for the next seven years. In current fiscal, RBI had recently upped its GDP growth estimate to 7 per cent.

He said that government’s commitment towards efficient fiscal management along with buoyant revenues support the macro economic stability. Tax revenues are much higher than previous years and there is gradual consolidation of fiscal deficit. “Revenue growth in recent years has enabled the government to take the mantle of pushing public investments”, he added.

Also, the Centre’s Production Linked Incentives (PLI) is already having its impact in telecom and electronics and the benefit is expected to flow in other sectors too this decade, he noted.

On exports, Nageswaran said that many people are worried that merchandise exports have stagnated in India.  “But you must recognise that India has zoomed out of $250-300 billion range to the $450 billion orbit. We have long way to go. But we are on right path”, he said.

MINDSET CHANGE 

Nageswaran called for a mindset change across the society — in terms of both in government and outside —in terms of payments on time. “Mindsets of the bureaucracy across the country must be of facilitating economic activity rather than ensuring that economic activity is compliant. There is a trade-off between the two. Both are two different goals”, he said.

“Right now the mindset is I will facilitate economic activity subject to compliance. That is a very different statement than saying I will ensure compliance but subject to economic activity being facilitated. These are two different ways of framing public policy challenge and thus mindset needs to seep in all levels of government”.

He underscored the need to move from a prescriptive framework to principles based regulation at sub-national government level as well. “Only when that happens our MSMEs (by and large having less than ten employees) can expand the labour force as well. MSMEs are devoting considerable time for regulatory compliance and that needs to change”, he said.

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