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Time has come for the corporate sector to do heavy lifting on investments as they have strong balance sheets and enough resources for this purpose, said a top Finance Ministry official.
Rebalancing of growth drivers towards investment and manufacturing will happen if the investment cycle gets into high gear as it did in the first decade of the millennium, said V Anantha Nageswaran, Chief Economic Advisor (CEA), on Thursday.
Addressing a plenary session at the Global Economic Policy Forum 2023, organised by DEA and CII, Nageswaran highlighted that government believes that enabling conditions for rebalancing are in place.
He exuded confidence that rebalancing will happen as the balance sheets have been largely repaired, both in the financial and corporate sectors, the gross savings of the private non-financial companies have doubled in eight years (FY14 to FY22) from ₹10.8-lakh crore to ₹22-lakh crore, and the corporate resources balance, which was negative from FY13 to FY20, has turned positive.
On the issue of trade, the CEA said that growing exports amid the present slower global economic growth period will require a focus on expanding India’s market share of global trade.
On global economic uncertainty, Nageswaran said “we can’t wait for uncertainty to abate or recede to start investing”.
Waiting for demand to arise before investing will delay the onset of demand conditions, he said adding that consumption must be residual and that investment will lead to employment and income generation, which in turn, will lead to consumption and savings will be recycled back to investment.
The onus of ensuring that rebalancing happens must be shared between the non-financial private corporate sector and the financial sector, he said, noting that the corporate sector has enough resources to make investments and make the rebalancing happen.
It is a good time for India to exploit the current global situation and make its presence felt in many aspects of global supply chains, he said. Noting that the infrastructure gap, compliance burden, policy provisions that prevent scale and the financial sector’s unwillingness to lend have been holding back the corporate sector from investing, the CEA said that the government is already addressing these issues.
global champions
Initiatives such as Aatmanirbhar Bharat and PLI schemes, coupled with infrastructure spending and decriminalisation of laws, are meant to create global champions in India.
The CEA also called the retail investors to rebalance from speculation to real investment for the long term; the country from euphoria to tough optimism; public policy from regulation to facilitation; industry from protection to facing greater competition; citizens from rights to responsibilities; and businesses from short-run profits to long-term profitability and R&D investment.
Janmejaya Sinha, Chairman, BCG India, noted that India has done reasonably well over the last 30 years, during which the country witnessed a growth rate of over 7 per cent for 14 years. There has been an underpinning of growth that is powering the economy, he added.
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