No investments pause due to elections: R. Dinesh
Economy likely to grow at 6.8%; Capacity utilization in factories now at 75-95% across sectors, warranting fresh investments, says CII chief
Private investments will continue to take place without any pause on account of the election cycle and the Indian economy is expected to grow at 6.8% in FY24, TVS Supply Chain Solutions chairman and Confederation of Indian Industry (CII) president R Dinesh said in an interview on Wednesday.
Dinesh said that capacity utilization in factories are now seen at 75-95% across sectors, warranting fresh investments. Dinesh also said industry now does not expect a softening in the RBI's policy rates soon.
"As per the CII business outlook survey of our members, more than 50% have said they expect higher private investment taking place in in the second half of this fiscal compared with the first. Secondly, if you look at capacity utilization for almost three quarters, most of our members and data points across all sectors point to capacity utilization is between 75% and 90-95%. It is not limited to one or two sectors but across sectors," said Dinesh.
The growth rates of 7.8% and 7.6% in the first two quarters, respectively, and 6.8% expansion expected this year would mean that the focus of the government on infrastructure will continue, he said. The RBI's estimate is 6.5% growth this fiscal.
"The need for private capital investment is going to be very much felt across sectors including construction, cement, automobile and others. We are expecting 6.8% GDP growth this fiscal," said Dinesh.
Official data released last month had shown that investments in fixed assets, which includes both investments by the government and private sector grew at 11% annually in the September quarter. The capital expenditure of the central and state governments typically makes up for about 11% of the gross fixed capital formation.
Dinesh also ruled out any pause in investment by the industry due to the ongoing election cycle. Dinesh said that in the previous election cycle in 2019, there was no pause in investments.
"I think there is a common belief that consensus is there that investments need to take place cutting across sectors...I do not think private sector is worried about the election in itself."
Dinesh also said the government has walked the talk on keeping the focus steady on infrastructure and fiscal discipline.
Experts said that government's capital expenditure is likely to continue without getting subdued in spite of the election. "A big change in recent years is that public infrastructure spending, at the Central level, has been smoothened despite electoral cycles. Interestingly, state governments have also joined in this fiscal year. So, capital expenditure on infra is expected to continue unabated, except perhaps in the final quarter of the fiscal when code of conduct related restrictions kick in," explained Sachchidanand Shukla, group chief economist at Larsen & Toubro Ltd.
Dinesh said any increase in lending rates due to further transmission of the RBI's monetary policy may not be a dampener. In its 'Monthly Economic Review - October 2023,' the finance ministry had said a fuller transmission of the monetary policy could temper domestic demand. The economy has matured enough to withstand a slight increase in interest rate, he added.
India has proactively managed the needs of growth and of containing inflation, but inflation has not fully come under control and one needs to be vigilant, he said. The RBI's target for consumer price index (CPI) based inflation is 4% and that it is yet to be achieved, he said. Retail inflation in October was 4.87%.
"Having said that, there are pockets where some liquidity crunch is being felt," Dinesh said, citing some micro, small and medium scale businesses. But they are pockets rather than a broad spectrum of issues, the CII president added.
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Business NewsIndustryNo investments pause due to elections: R. Dinesh
First Published:6 Dec 2023, 07:21 PM IST
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