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Informist, Monday, Jul 22, 2024

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--EconSurvey: Need private sector to invest in research, development

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--EconSurvey: India in mid of private capex upcycle
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NEW DELHI – India is currently in the mid of an uptick in private capital expenditure that has been aided by government capital expenditure, The Economic Survey for 2023-24 (Apr-Mar) said today. "There are early signs that the momentum in private capital formation has been sustained in 2023-24," the survey that Finance Minister Nirmala Sitharaman tabled in Parliament today said. 

According to National Accounts Statistics 2024 released by the Ministry of Statistics and Programme Implementation, gross fixed capital formation by private non-financial corporations increased by 19.8% in 2022-23. There are early signs that the momentum in private capital formation has been sustained in 2023-24, the survey said. 

The private capital formation is expected to expand in 2024-25, Chief Economic Adviser V. Anantha Nageswaran said at the post-survey press conference today.

Public investment has sustained capital formation in the last several years even as the private sector shed its balance sheet blues and began investing in 2021-22. Now, it has to receive the baton from the public sector and sustain the investment momentum in the economy. The signs are encouraging, it said.

Though the Economic Survey said that private capital expenditure is in the mid of an upcycle, its commentary is only incremental to what the previous survey had said. In January 2023 as well, Nageswaran had written in the survey that it was time for the private sector to take the baton for economic growth.

Nonetheless, Nageswaran said that private capital expenditure has recovered.

Economists are of the view that private sector spending is majorly a factor of demand in the economy. Though the Indian economy grew at a robust 8.2% in 2023-24, many experts remained unimpressed as, beyond the headline figure, there was a tepid consumption story. The growth was underpinned by robust government spending amid record-low private consumption in 2023-24. 

The government has been pushing its capital expenditure to crowd-in private investment, while also having a multiplier effect on the country's economy. In the past five years, the government has increased capital expenditure by more than three times to 11.11 trln rupees in 2024-25 from 3.36 trln rupees in 2019-20.

"For India to continue down the path of building quality infrastructure, a higher level of private sector financing and resource mobilisation from new sources will be crucial," the survey said. "Facilitating this would not only require policy and institutional support from the central government, but state and local governments would have to play an equally important role," it added.

It also said that the private sector needs to increase its spending in research and development areas.  End

Reported by Priyasmita Dutta

Edited by Akul Nishant Akhoury

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