Right Time to Make Investments
Chief Economic Advisor (CEA) Krishnamurthy Subramanian on Wednesday said that it is the right time to invest in the country as labour cost and other expenditures would be lower due to the slowing economy and it is investment which would spur economic growth.
Speaking at a FICCI event here on retail, FMCG and e-commerce, the CEA observed that economic activity and growth involves a cycle which would fasten if investments grow.
"The economy typically goes through a virtuous cycle. The key driver of this cycle is investment. It's investment that enhances productivity, and productivity enhances wages, and creates jobs in the economy," Subramanian said.
"Productivity increases purchasing power and anticipating that purchasing power, corporates invest more," he added, while elaborating on the cycle.
He said that in 2008-09, the investment rate in the country was around 40 per cent of the GDP, which eventually came down due to vareious reasons, including high non-performing assets and "excessive capacity creation at corporate level".
He noted that although recent discussions have largely centred around a consumption slowdown, consumption is a short term variable in the economy, while investments have to be made with a long term perspective.
The CEA also said that it is the "dual duty" of large corporates to invest and set an example for other companies.
Citing a report, he said that large corporates owe around Rs 40,000 crore of payables to MSMEs.
Large companies should pay off their dues to smaller companies as these are more dependent on working capital and are more impacted by the liquidity crisis, he added.