Pvt sector needs to scale up investment, says CEA Nageswaran

New Delhi, December 9

Chief Economic Adviser V Anantha Nageswaran on Friday said private sector needs to increase capital expenditure as it may not be healthy for the public sector to continue to invest at the same pace as it did in the last decade.

The combined investment by Centre, states and public sector enterprises have gone up 3.5 times over the past 10 years from Rs 6.8 lakh crore to Rs 21.2 lakh crore currently.

Capex must increase

We’re also ensuring that the combined investment spending by the public and the private sector should not drive up the cost of capital too much for the economy. —V Anantha Nageswaran, CEA

“In the decade when the non-financial corporate sector and the banking system were repairing balance sheets, the public sector took over and kept up economic growth throughout the second decade of the millennium and it has continued well into the current decade as well,” Nageswaran said at a CII’s Global Economic Policy Summit 2022 here.

The Chief Economic Adviser in the Finance Ministry said there was a need to decide whether to continue to scale up investment at the same pace or allow the private sector to start functioning as ‘primary engine of capital formation’ in the economy.

The corporate sector, he said, currently has a very healthy balance sheet and the bottom line and the balance sheets of banks and financial institutions have repaired and they are ready to lend.

“Therefore it may not be necessary or may not be healthy for the public sector to keep expanding capital investment at the same pace.

“Capital expenditure has to continue to increase, but not at the same pace because we should not only be not crowding out the private sector but also ensuring that the combined investment spending by the public and private sector should not drive up the cost of capital too much for the economy,” Nageswaran said.

Nageswaran’s comments follows a nudge by Finance Minister Nirmala Sitharaman in September, where she sought to know from the industry what is holding it back from investing in manufacturing, even though foreign investors show confidence in India.