Home/ Economy / Capex push to aid economy: CEA

The Union government is following a capex driven strategy to boost India's economic activity, Krishnamurthy Subramanian, chief economic adviser in the finance ministry, said on Tuesday.

Citing the FY21 March quarter GDP data, Subramanian said gross fixed capital formation (GFCF) which represents investment demand in the economy rose nearly 30% and as a result the ratio of GFCF to GDP hit 34.3% - the highest in last 26 quarters, though a lot of it was government capex.

“The two key spillover effects that manifested (because of spurt in GFCF) was one, consumption after having declined three quarters because of both the pandemic induced restrictions and pandemic induced risk aversion, grew by 2.7% in the fourth quarter. Secondly, contact sensitive sectors which were affected across the world because of the pandemic and declined in high double digits in the previous three quarters declined by only 2.3% in the fourth quarter. This is quite important to illustrate the linkages that are there at the macro- economic level from investment to consumption and service sector activities as well," he said while speaking at a webinar organised by ISID and UNCTAD.

Rating agency S&P Global Ratings on Tuesday said it believes willingness to invest will stay strong across Asian markets although it may be delayed due to fresh covid waves in some countries, particularly India. “Struck by covid variants and lack of vaccines, consumption recovery in India and Indonesia will likely delay further into 2023, while sales in China, Japan, Australia, and Korea have largely normalized," it added.

Finance minister Nirmala Sitharaman on Monday announced a relief package targeting healthcare, tourism, exports and job creation to support the economy that is struggling to recover from the pandemic’s second wave. The central government will foot 15,000 crore under a 23,220 crore credit guarantee scheme to strengthen public health infrastructure and human resources. This will focus on short-term emergency preparedness with special emphasis on children and paediatric care.

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Updated: 29 Jun 2021, 05:44 PM IST
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