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Revive pvt sector investment to counter slowdown, says Crisil

The private sector needs to step up and provide a cushion for India?s current economic slowdown as the government?s tight fiscal situation has meant that public sector can?t do much, says Crisil Research in a report released on Tuesday.

The private sector needs to step up and provide a cushion for India?s current economic slowdown as the government?s tight fiscal situation has meant that public sector can?t do much, says Crisil Research in a report released on Tuesday.

The report also adds that the government, on its part, needs to tackle issues of policy bottlenecks, slow clearance of projects and rising inflation which has stifled private sector in recent years.

?The public sector cushioned India?s growth during the global financial crisis of 2008-09 to 2009-10 when private sector GDP growth had slipped to 6% from pre-crisis levels of 9.7% per year,? said Dharmakriti Joshi, chief economist, Crisil. ?Without a robust 12.3% growth in public sector GDP on the back of increased government spending, India?s overall GDP growth would have averaged 6.2% and not 7.6% during those two years.?

However, the scenario is different today as compared to 2008-09. ?The weak fiscal position of the government constrains it from raising public sector GDP through increased spending,? said Roopa Kudva, managing director and chief executive officer, Crisil.

?This is evident from the decline in public sector GDP growth to 6.5% in 2010-11 from 14.5% in the previous year,? she added. ?Consequently, the sustainable upside to growth will largely be shaped by the revival of private sector sentiment and investments.?

Crisil Research says that the Government should be playing the role of the enabler by removing policy logjams, speeding up project clearances and adding a fresh dose of economic reforms.

The research agency states that growth impetus from monetary policy and external stimulus is also unlikely.

?Persistently high inflation implies that the monetary policy via interest rate cuts can play a limited role in reviving growth,? the report states. ?The depressed global outlook rules out any external stimulus to India?s growth rate.?

The tight fiscal position of the government means that government spending is also constrained, leaving the onus completely on the private sector, according to Crisil.

?The public sector cannot substitute for the lack of growth in the private sector on a sustained basis,? the Crisil report states. ?Through increased spending on physical infrastructure and social infrastructure, public sector?s role will be to create an enabling environment for the private sector to accelerate investments.?

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First published on: 18-07-2012 at 02:20 IST
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