CEA Urges India Inc to Boost Capex, Worker Pay to Sustain Growth

New Delhi: A day before the government’s fourth quarter GDP data which is scheduled to be released, chief economic advisor (CEA) V Anantha Nageswaran on Thursday asked India Inc to ramp up capital expenditure and raise workers’ compensation in line with profitability growth to achieve over 6.5 per cent economic growth and become a developed nation by 2047.

On the investment front, the CEA also said that the increased investment would not only enhance capacity, but will create more jobs at greater remuneration, leading to higher household savings. “We are facing this challenge that the growth in profitability has not only exceeded the growth in capital formation, but the growth in profitability has also trailed the growth in compensation, which includes hiring as well, and that is something that we can ill afford for the next 25 or 30 years,” he said.

Addressing the CII event here, Nageswaran also said that the private sector should focus on the balanced deployment of capital and labour, he said, adding that India would require a lot of investment in creating capacities, including in infrastructure space, over the next 25 years. “Meeting India’s capital needs would require steady growth in household incomes and savings and this can be possible when their income rises,” he noted.

Nageswaran also highlighted the importance of reducing the regulatory burden for better productivity of capital, but for this, trust has to be developed between the government and the private sector. “In fact, a significant share of regulatory overreach is sometimes due to the non-reciprocity of trust on the part of the private sector. Therefore, from our perspective, the 'what' of deregulation is clear, but 'how' becomes more challenging, because sometimes deregulation leads to unintended consequences of abuse as well,” he added.

For achieving the goals of Viksit Bharat, he said, there is a need for a collaborative approach based on trust. “We cannot achieve the kind of development that we hope to achieve in the next 25 years unless there is a collaborative approach, not just between Union and state governments, but also between governments around the country and the private sector,” he said.

With regard to growth, he said India achieved the growth rate that the Economic Survey had projected between 6.3-6.8 per cent and will sustain it for a longer period on the back of good monsoon, capex push by the government, tax relief and low interest rate environment. “On the exchange rate, the fall in the rupee may not be too high; rather, it should be in the range of 0.5-0.8 per cent going forward,” he said.

“Do not expect that the Indian rupee will necessarily be weakening as it did in the last 30 years, because, for various reasons. It is quite possible that we may have to deal with the challenge of living in an environment of a stronger currency rather than a weaker currency, because of international trends,” he added.