CEA: Need to increase investments significantly

‘Large corporates need to ensure that the payment cycle functions smoothly’

There is a need to significantly increase investment to boost economy, Chief Economic Adviser (CEA) Krishnamurthy Subramanian said.

"Up and until around 200809, our investment rates were touching 40% of GDP. That has declined secularly. The reasons for that some of which relate to the banking sector, the non-performing assets that they've created, excess capacity that was created at the corporate level. Investment rate has turned a corner, but still we need to increase the investment rate significantly for the virtuous cycle to start operating much faster," Subramanian said.

There has been concern over the economic growth from several quarters, including ratings companies and multilateral agencies over the last few weeks.

India's GDP growth unexpectedly hit a 25-quarter low of 5.0% in Apr-Jun, forcing economists to make broad cuts to their growth forecasts. Earlier this month, the RBI lowered its projection for GDP growth for the current financial year by 80 bps to 6.1%, while last week, Moody's Investors Service reduced its estimate by 100 bps to 5.8%.

Earlier this week, the World Bank made a downward revision to its GDP growth forecast for India for 2019-20 (AprMar), lowering it by an enormous 150 basis points to 6.0%.

Growth in India's industrial output, based on the IIP, fell to an over six-and-a-half-year low of (-)1.1% in August as manufacturing and electricity output contracted, data released last week by the Central Statistics Office showed.

Subramanian said the fundamentals of the Indian economy continue to be strong, and that it is the right time for corporates to invest.