New Delhi: Reserve Bank of India (RBI) Governor Shaktikanta Das Thursday joined the rising chorus of voices calling for the private sector to step up its investments, saying that several factors are favourable for the sector to “come forward in a big way”.
Das added that the economy would need a “multi-pronged and a multi-sectoral approach” to reach advanced status by 2047.
Delivering the inaugural address at the annual banking conference organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) and Indian Banks’ Association (IBA), Das said the Indian growth story “remains intact”. He noted both the IMF and the World Bank have upgraded their growth expectations for India to 7 percent in the current financial year.
He said the 6.7 percent growth rate in the first quarter of this financial year, lower than expected, was likely because of lower government spending due to the pre-election model code of conduct.
Das also reiterated that the central bank’s projection of GDP growth at 7.2 percent for 2024-25 “does not appear out of place”.
Step up, private sector
The RBI governor said it was evident that India was on a “sustained growth path”, adding: “Consumption and investment demand, the two main drivers of growth, are growing in tandem. Government expenditure of the centre and the states is likely to pick up pace in line with the Budget Estimates in the remaining quarters of the year.”
He further said that strong balance sheets of banks and corporates have “created congenial conditions to further support private capex”, and that corporate profits have grown by 14.2 percent in Q1 of this financial year.
“To realise the aspiration of transitioning from an emerging to an advanced economy by 2047, the Indian economy would need a multi-pronged and a multi-sectoral approach,” Das said. “Our focus should be on employing all engines of growth from both supply and demand sides.”
One of these engines — domestic consumption — will help insulate the Indian economy from the vagaries of external uncertainties, he said, but also stressed on the importance of investment, especially by the private sector.
“Investment remains critical for sustainable growth of the economy and, given the current confluence of favourable factors, it is time for the private corporate sector to come forward in a big way,” he said.
Das’s statements come soon after the Economic Survey pointed out that the private sector was not investing enough in productive and growth-generating areas. Then Finance Secretary and current Cabinet Secretary T.V. Somanathan also told ThePrint that he did not know why the private sector was not investing.
This frustration with the private sector isn’t new. As far back as 2022, Finance Minister Nirmala Sitharaman had bluntly asked assembled industry leaders why they were not investing. “What’s stopping you when countries and industries abroad think this is the place to be,” she asked.
More recently, in May this year, Sitharaman again highlighted the “big role” of the private sector in taking India to developed status by 2047.
Also read: Indian investors don’t need a coddling nanny. Let them make mistakes and learn
Key sectors must forge new paths
Das said Thursday that the manufacturing sector’s contribution would be “pivotal” in generating additional employment. Towards this, he noted that initiatives such as Make in India, Startup India, One District One Product, and the Production-Linked Incentive schemes were helping the sector gain competitiveness and grow faster.
That said, he added, the overall manufacturing sector must look to creating niches so that it can compete effectively.
“The MSME sector, in particular, holds a lot of promise to step up growth and employment opportunities,” he said. “Overall, the manufacturing sector must take the lead in niche areas to compete globally.”
“The potential of external demand can be utilised to our advantage by getting integrated into the global supply chains,” Das emphasised.
On the services sector, Das acknowledged it had remained the mainstay of growth in the Indian economy for the last several decades, but must now “explore new vistas of opportunities” with a focus on higher value-added services.
“In addition, requisite focus on research and development (R&D) is also vital for productivity and competitiveness,” he said. “Together with government initiatives, including higher fund allocations for R&D, the private sector may also be an active partner in this field.”
(Edited by Tikli Basu)
Also read: RBI guv contradicts Economic Survey’s proposal to keep food out of inflation-targeting
The ethno nationalism ( Hindi -Hindutva) displacing secularism could be one factor.