Chief Economic Advisor sees rosy days ahead, predicts investments will go up to 35% of GDP

While acknowledging the increased capital expenditure by the government, Dr V Anantha Nageswaran suggested a gradual pullback.

V Anantha Nageswaran (Right) with Shankkar Aiyar, author and analyst during THINKEDU Conclave 2024. (Express Photos, P Jawahar)

CHENNAI: Chief Economic Advisor Dr V Anantha Nageswaran allayed concerns regarding the lack of private investments, emphasising that they will increase within the next four years.

At a panel discussion titled Getting the Economy Right: The Rise of India on the second day of the ThinkEdu Conclave 2024, presented by SASTRA University in Chennai, Nageswaran projected a sustained rise in the investment rate that would touch the mid-30s and result in a seven percent GDP growth.

Currently, investments are at around 30% of GDP.

While acknowledging the increased capital expenditure by the government, he suggested a gradual pullback.

"The pace of increase that we have (had) to do for the last six financial years (FY2018- Fy24) may not necessarily have to be sustained. Now the private corporate sector is stepping in. So, there is scope for the government, not to pull back in absolute terms, but pull back the rate of growth (of our investments),” said Nageswaran, during the session that was chaired by author and analyst Shankkar Aiyar.

Responding to questions about sustaining public investments, Nageswaran highlighted the government's increased capital expenditure -- from 1.8 percent to 3.5 percent of GDP -- partially due to the pandemic.

Addressing the economic recovery, he dismissed notions of a 'K-shaped' recovery, emphasising that rural consumption, although slower than urban consumption, is not contracting.

"Many of these instances are anecdotal; we don't gather statistics based on urban and rural demarcations. In rural India, discretionary consumption spending is on the rise with rural wages surpassing the inflation rate. I believe that the gap we have observed, or the anecdotal stories about urban consumption versus rural consumption, is likely narrowing," commented Nageswaran.

Nageswaran underscored the need for improvement in the pace of creating jobs in the organized sector and acknowledged the ongoing challenges in terms of formal contracts and regular wage-paying jobs.

"We need to make improvements in terms of the number of people with formal contracts and those having regular wage-paying jobs; these proportions are still relatively smaller. However, it is equally true that the unemployment rate, which peaked at 21% during the pandemic, has now reduced to 6.6 percent in urban India. If we consider the overall unemployment rate, including rural India, it stands at 3.2 percent," said Nageswaran.