India’s sustained 7 per cent-plus growth over four consecutive years is real, but increasingly vulnerable to global capital tightening, weak private investment and a dysfunctional judiciary, top economists said at the 13th SBI Banking and Economics Conclave in Mumbai on Thursday.
Citi India Chief Economist Samiran Chakraborty said unlisted companies are driving investment far more than listed ones, with capex growth in the unlisted consumer goods sector averaging 42 per cent over three years against just 6 per cent in listed companies. India’s household debt, at roughly 35 per cent of GDP on an internationally comparable basis, remains well below the 60 per cent threshold where growth effects turn negative, he added.
Heavy competition
On the balance of payments (BOP), RBI MPC Member Saugata Bhattacharya warned that India’s annual capital inflow requirement exceeds $60 billion going forward, while recent years have already seen a negative capital account. He noted that India can no longer rely on either a growth differential or interest rate differential to attract foreign capital, given competition from surplus economies like South Korea and Taiwan and rising global rates. The panel voted, with a majority, that the Reserve Bank of India would hike rates at its October 7 meeting.
Private capex remains stalled, said Suresh Goyal, Director General, National Council of Applied Economic Research (NCAER). He pointed to a severe capacity constraint in infrastructure building and said the combined revenues of India’s next 10 largest contractors are still half those of L&T alone, while the latter’s overseas order book has risen to 54 per cent of its total.
Judicial delays
Laveesh Bhandari, President, Centre for Social and Economic Progress (CSEP), identified judicial delays and contract non-enforceability as the primary deterrent to private investment, citing over ₹1-lakh crore stuck in disputes in national highways alone. He called for an internal appellate mechanism within government departments to de-risk payment clearances for officers.
Private capex remains stalled, said Suresh Goyal, Director General, National Council of Applied Economic Research (NCAER). He pointed to a severe capacity constraint in infrastructure building and said the combined revenues of India’s next 10 largest contractors are still half those of L&T alone, while the latter’s overseas order book has risen to 54 per cent of its total.
Judicial delays
Laveesh Bhandari, President, Centre for Social and Economic Progress (CSEP), identified judicial delays and contract non-enforceability as the primary deterrent to private investment, citing over ₹1-lakh crore stuck in disputes in national highways alone. He called for an internal appellate mechanism within government departments to de-risk payment clearances for officers.
