New Delhi: Chief Economic adviser in the finance ministry Krishnamurthy Subramanian on Wednesday called upon large companies to show leadership and kickstart the investment cycle and pay off pending dues to small and medium enterprises to revive consumption.
Speaking at an event organised by FICCI, Subramanian quoted verse 21, chapter 3 of Bhagavad Geeta, which says:
Yad yad ācharati śhreṣhṭhas tat tad evetaro janaḥ
Sa yat pramāṇaṁ kurute lokas tad anuvartate
(Whatever actions great persons perform, common people follow. Whatever standards they set, all the world pursues.)
Subramanian said large companies should show the way through proof of investment which actually inspires others to follow suit. "I will request large corporates to recognise that there is this virtuous cycle which operates with a lag and when the economy has slowed down a little, when your bargaining power vis a via wage and labour has increased, this is the time to invest and show the way for other corporates," he added.
The CEA said the key driver of virtuous cycle is investment. "It's investment that enhances productivity which enhances wages, creates jobs in the economy which increases purchasing power and anticipating rise in demand companies invest further. That is how the virtuous cycle runs," he added.
Subramanian said investment rate has declined secularly from its peak of around 40% in 2008-09. "Though it has turned a corner recently, we still need to increase investment rate significantly for the virtuous cycle to start operating at a much faster rate," he added.
Subramanian said government has been on its toes addressing many aspects of the economy. "Fundamentals of the economy remain very very strong. The sentiment which impacts consumption is a short term variable, investment has to be from a more long term perspective," he added.
Qouting news reports that large private firms owe ₹40,000 crore to MSMEs, Subramanian said working capital are the lifeline of small companies which are dependent on cash flow cycles. "Large corporates need to set the benchmark by paying them on time," he added.