Big Private Investments Will Follow Only If Government Invests As Promised
Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Author of Cyber Scams in India, Digital Arrest, The Money Trap and The Human Hack
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By Sunil Garodia
First publised on 2022-02-02 15:09:23
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Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Author of Cyber Scams in India, Digital Arrest, The Money Trap and The Human Hack
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Should the captains of industry revive their investment plans now that the government has indicated that it will increase capex by 35% in FY 2022-23? For it is sure that if the government spends as promised, there will be huge demand for core sector goods (steel, cement, building materials etc.) and downstream units will also benefit. The chain effect will lift the mood and there will be work for all. The extra money flowing in the economy will also give a huge push to demand for goods and services.
But will the corporate sector take the government at face value? Huge sums have been bandied about in the past too but actual investments have been much lower. This time around, as private consumption is not picking up, one thinks that industry will wait and watch how the government spending plan unfolds before making their plans.
The Indian Express has reported that most bankers feel that the private sector will not rush in immediately and big private investments will only come after a year of so. That is most likely as suppressed demand for goods and services has left idle capacity in many units as orders are not forthcoming. So before expanding capacity or creating new units, the private sector is likely to see how government spending pans out, how it kick starts the economy and how demand picks up as a result of money flowing into the economy.
While it is natural for the government to expect that the private sector will supplement its efforts to revive the economy by investing in expanding capacity in existing units or going in for new units, business sense will dictate that the private sector will do so only after it is confident that government spending is having the desired effect on turning the wheels of the economy and raising demand. After all, as opposed to the government which looks for creating assets in the form of highways, roads, housing and industrial zones, the private sector looks for profits that will come only if the demand for goods and services shows an uptrend.
picture courtesy: ukibc.com, caption ours
