Enabling conditions in place for rebalancing towards investment and manufacturing: CEA
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 Dr V Anantha Nageswaran, Chief Economic Advisor (CEA) to the Government of India. The CEA was speaking at a plenary session on ‘Consumption, Trade or Investments: Should India Rebalance its Drivers of Growth’ during the Global Economic Policy Forum 2023 organized by the Confederation of Indian Industry (CII) in partnership with Department of Economic Affairs, Ministry of Finance in New Delhi on 7 December. The CEA said that the Government believes that enabling conditions for rebalancing are in place.
Dr Nageswaran 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 - FY22) from Rs 10.8 to Rs 22 lakh crores, and the corporate resources balance, which was negative from FY13 - FY20, has turned positive. Talking about trade, the CEA said that growing exports amid the present slower global economic growth period will require a focus on expanding our market share of global trade.
Addressing the global economic uncertainty, Dr 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 getting 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. Initiatives such as Aatmanirbhar Bharat and PLI schemes, coupled with infrastructure spending and decriminalization 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.
Mr Ashok Bhattacharya, Distinguished Fellow, Ananta Centre and Editorial Director, Business Standard said that analysis and projection of the economic growth potential can be easier if quality data can be collected at a faster rate. India was a true leader globally and it's time to regain that position in the world, he added. He also underlined the importance of trade in the growth story.
India has consistently increased its share in world exports and is going to continue to grow, said Dr Ajay Chhibber, Distinguished Visiting Scholar, Institute for International Economic Policy (IIEP), George Washington University and Non-Resident Senior Fellow, Atlantic Council (USA). Expressing confidence that export growth will be high, he said that almost half the exports are going to come from services, which is a component of the world trade, that is not slowing down. He said that consumption can only grow the economy temporarily and that ultimately, exports and investments are the factors that create jobs and income. Corporate investment is largely determined by capacity utilisation, which is now, according to an RBI survey, is at a very high level; much higher than at any time in the last decade.
Ms Anita Prakash, Senior Policy Advisor, Economic Research Institute for ASEAN and East Asia (ERIA) noted that services trade is growing in leaps and bounds across the globe, despite AI and its associated technology having some effect for service providers at the lower level of the service value chain. However, she highlighted that manufacturing will continue to remain an important source of employment and income generation, going forward too.
Dr Janmejaya Sinha, Chairman, BCG India, moderating the session, noted that India has done reasonably well over the last 30 years, during which, India 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.
7 December 2023
New Delhi