India's Chief Economic Advisor (CEA), V. Anantha Nageswaran, emphasized the imperative for the corporate sector to enhance investments, playing a pivotal role in steering the nation's economy towards a more balanced focus on manufacturing and investment. Speaking at the CII's Global Economic Policy Forum 2023, Nageswaran underscored that balance sheets in both the financial sector and corporate realm have been substantially restored, with private non-financial companies witnessing a doubling of gross savings over the past eight years.
The CEA's message was unequivocal – corporations should proactively invest rather than hoard funds. He warned against waiting for demand to naturally rise before initiating investments, asserting that such a passive approach would only postpone the creation of favorable demand conditions. Nageswaran elucidated the critical connection between investment and a cascading effect on employment, income generation, consumption, and savings. He stressed that a delay in corporate sector investments would disrupt the virtuous cycle of employment growth, income escalation, and consumption expansion, impeding the realization of increased savings.
Despite this call to action, private investments in India have not rebounded to pre-pandemic levels. Job creation remains sluggish, and investments have been predominantly directed toward infrastructure and consumer sectors. The recovery in consumption has also been uneven, with rural demand lagging behind.
Nageswaran emphasized that the responsibility for rebalancing the economy, similar to the successful first decade of the millennium, rests on the shoulders of both the non-financial private corporate sector and the financial sector. He noted that the corporate sector possesses adequate resources to make these essential investments without solely relying on financial institutions or capital markets.
The investment slowdown occurs against the backdrop of a global economic downturn and uncertainties arising from conflicts in the Middle East and Ukraine.
(With Agency Inputs)
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