Private sector needs to scale up investment, pay MSME suppliers on time: Chief Econ Advisor

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

PTIUpdated: Friday, December 09, 2022, 09:29 PM IST
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Chief Economic Advisor (CEA) Anantha Nageswaran | File image

Chief Economic Advisor 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 last 10 years from Rs 6.8 lakh crore to Rs 21.2 lakh crore currently.

"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 millenium and it has continued well into the current decade as well," Nageswaran said at a CII's Global Economic Policy Summit 2022 here.

Scale up investment

The Chief Economic Advisor 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.

He also added that suppliers for small and medium sized businesses should be paid on time to ensure compliance by the private sector.

FM Nirmala Sitharaman asks investors what is holding them back

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.

Drawing a parallel between India Inc and the mythological character, 'Hanuman', Sitharaman had said the government is willing to engage with the industry and take policy action.

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