Amid the ongoing slowdown, weak growth in investment could be addressed by attracting large scale FDI into the economy, a report said.
Amid the ongoing slowdown, weak growth in investment could be addressed by attracting large scale FDI into the economy, a report said. The recovery is expected to be triggered by a rise in public capex spends (especially in the areas of roads, affordable housing, ports, railway and water) and strong foreign direct investment (FDI), Kotak’s Annual Outlook 2020 said. The pace of execution also needs higher attention, the report also said, adding that while it’s likely that the private sector capex recovery is still some time away, the favourable preconditions for investment recovery include; improvement in capacity utilisation levels; lower interest rates and the transmission of policy rate cuts along with strong balance sheets and corporate tax cuts should help provide the risk capital for growth. However, the economy needs to watch for a rise in oil prices, the continuation of the US-China trade war, the slowdown in global growth and the negative impact of any credit crisis in the domestic banking system, it added.
“The government has recognised the need for a structural recovery in investment, which in turn could result in sustained improvement in GDP growth trajectory. The policies of the present government seek to remove supply side bottlenecks in order to provide an environment for growth being more investment-led rather than only consumption-led,” the report added. The economy is currently seeing a slowdown. The economy grew at a dismal 4.5 per cent in the second quarter of the ongoing fiscal. According to the first advance estimates released by the government, the economy is expected to grow at just 5 per cent in FY20. The government has taken a slew of measures in the past few months ranging from the recapitalisation of banks to removing the tax on the super-rich.
Finance Minister Nirmala Sitharaman is expected to present the budget on February 1, 2020. The government is expected to announce fresh measures to check slide in growth and increase consumption.