New Delhi [India], August 15 : Mehul Pandya, Managing Director and Group CEO of CareEdge Ratings, believes that the primary reason for the slow pace of private capital investment in India lies in the private sector's cautious approach to capital commitments.
"Any private sector would like to see a sustained demand for themselves," Pandya said in an interview with ANI, where, among others, he shared his perspective on why private investment in India continues to lag despite significant government efforts, increased capital expenditure, and a strengthening economy.
Business expansion decisions are always rooted in "hardcore economic analysis," according to the CareEdge CEO. He noted that businesses require convincing evidence that future demand will remain strong enough to justify investment in growth and additional capacities.
"Any private sector would like to see a sustained demand for themselves. Because if they are committing capital for the growth and maybe added capacities, it would always be based on certain hardcore economic analysis," he said.
Demand conditions have been inconsistent in India over recent years.
"In between, we have seen the consumption taking a bit of a hit," Pandya asserted.
He added that geopolitical uncertainties have further compounded business hesitancy.
"A year has passed by where we have seen some kind of a benign global landscape. Something always keeps on happening," he said, pointing to the fact how unexpected global events can derail investment plans.
Private players are perhaps waiting for both economic and geopolitical stability before committing large sums.
Talking of the government, Pandya acknowledged that the government has done "fantastically well" in driving growth through capital expenditure, particularly in infrastructure.
"This is something which the government has again demonstrated and remains fully committed to, and it has paid off well for the economy," he said.
Despite India's strengthening macroeconomic fundamentals, demand growth has been subdued.
Pandya pointed to high inflation in recent years as a key factor, which, according to him, had eroded the purchasing power of consumers.
"The government did the right thing in the last budget," he said, referring to changes in tax brackets and rates aimed at increasing disposable income.
"The government did the right thing in the last budget; they tried to put more money in the hands of the people with the change in the tax brackets and the tax rates, which was, in a way, addressing something which can clearly support the demand. The impact of this should be playing out over a period of time, but in between, while those measures were in place, the other developments which were taking place, they were holding the things back."
The CareEdge Ratings chief stressed that economic growth is influenced by a "mix and match" of supportive and adverse variables. In some periods, factors may align in a "linear manner" leading to faster results, while in others, opposing forces can delay progress.
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