Asserting that the economic situation is likely to improve during the year, Chief Economic Adviser V Anantha Nageswaran on Tuesday expressed hope that the private sector is expected to accelerate capital expenditure from the second half of the current fiscal.
Investment from the private sector has been muted for the past many years despite several measures, including corporate tax cuts, taken by the government to reinvigorate it.
“Bank credit is beginning to pick up, especially in MSME sector.Β Therefore, I think probably by the end of the second quarter or in the second half of the year, the private sector picking up the baton of capital expenditure… sooner rather than later Indian private sector will pick up the capital expenditure baton and run with it,” he said at an event organised by AIMA.
Finance minister Nirmala Sitharaman in the Budget raised capex (capital expenditure) by 35.4 percent for the financial year 2022-23 to Rs 7.5 lakh crore to continue the public investment-led recovery of the pandemic-battered economy. The capex for the year gone by was pegged at Rs 5.5 lakh crore.
An RBI (Reserve Bank of India) survey has shown a jump in capacity utilisation by the industry from 68 percent to 74 percent, Nageswaran said, adding, the top four firms in several sectors are already operating over 80 percent capacity.
He said, the government continues to balance short-term compulsion without losing sight of longer-term aspiration, macroeconomic stability, prudent budgeting, transparency, and emphasis on capital expenditure.
To provide relief to the poor, the government has extended the free food programme by another six months, which would cost the exchequer about Rs 80,000 crore, 0.65 percent of GDP.
“The robust state of balance sheet within private sector would enable the Indian economy to weather the current twin storm — geopolitical and Fed Reserve tightening. As we head toward the second half of 2022-23, blue sky will reappear and we can look ahead to a decade of India repeating in a more sustainable form, the kind of high growth we experienced between 2003-2012,” he said.
The major headwinds at the moment are the geopolitical situation and the aggressive stance of the US Federal Reserve on tightening monetary policy.
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