Chief Economic Advisor Anantha Nageswaran on Thursday noted the resurgence of private sector investments, emphasising their meaningful deployment of capital into the economy. He projected that the country’s capital formation, currently at 30.8% of GDP, could rise to the mid-30s over the next five years, driven by this trend.

“Private sector has begun to deploy capital on the back of much better balance sheets and much better profitability. That will continue”, Anantha Nageswaran said at the Global Economic Policy Forum 2024, jointly organised by the Finance Ministry and Confederation of Indian Industry (CII) in the capital.

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He highlighted that capital formation as a percentage of GDP was 27.3 per cent pre-COVID due to the private sector’s balance sheet issues. Now, it has increased to 30.8 per cent largely because of government-driven public investment, he said. “We do see this number (30.8 percent) heading to mid-thirties in the course of the next five years,” Nageswaran added.

To grow sustainably, Nageswaran spelt out five areas of policy emphasis for the medium term. These are making agriculture productive and resilient, generating employment and skill development, promoting MSMEs and manufacturing industries, encouraging innovation through research and development, and Addressing climate change while ensuring energy security.

He also highlighted that the recent spike in global uncertainty and spike in supply chain disruptions — both seen in Q2 and affecting Indian GDP growth in Q2 — are going to be enduring challenges, and policymakers need to accept them.

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Nageswaran also stressed the need to ensure that data generated out of Digital Public Infrastructure (DPI) are used for public welfare purposes without compromising security. “This could add 0.5 percentage points growth to Indian GDP growth,” he noted.

Remove Fear of Growth 

Nageswaran also stressed the need to remove the fear of growth in MSMEs. “Unfortunately our support policies over the years since independence have kept them small robbing them of mindset to grow. 

Making sure our micro enterprises become small, small becomes medium and medium becomes large should now be our priority,” he noted.