CEA Nageswaran To India Inc: Don't Wait For Demand To Drive Investment

India's Chief Economic Advisor V Anantha Nageswaran told Indian corporates that they need to move away from consumption-led investment and not be constrained by imagination as uncertainties are going to be there.

The current decade will be a decade of uncertainty, he said, while speaking at the Confederation of Indian Industry's Global Economic Policy Forum, organised in partnership with the Indian Department of Economic Affairs on Thursday.

"...the corporate sector has to accept uncertainty as a given for the rest of the decade and actually start to invest because waiting for the demand to arise before they start investing will be actually to delay the onset of such demand conditions," he said in his special address.

If the corporate sector delays investment, then the virtuous cycle of employment generation, income growth and consumption growth—leading back to more savings and more investments—will not materialise, the CEA said.

Nageswaran's comments come after the announcement of Q2 GDP data, where India beat estimates to grow at 7.6%. While addressing the media, he had said that investment and consumer momentum will underpin solid growth prospects over the upcoming year.

In terms of outlook, the private sector is poised to attain stronger investment growth following the strengthening of corporate and bank balance sheets, supported by the government’s capex push, he had said.

Quoting the recent RBI bulletin, Nageswaran said on Thursday that fundraising done by corporates in the first six months of the current financial year through various sources—not just from banks—were 16% higher than last year, and these were funds raised with the purpose of investing. "So, the question is actually deploying them and putting them to work," he said.

Prompted by the title of the plenary session, ‘Consumption, Trade or Investments: Should India Rebalance its Drivers of Growth’, he said that 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.

In a similar vein, he added that retail investors need 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 profit to long-term profitability while moving from 'jugaad' to geniune R&D investment.