Chief Economic Advisor V Anantha Nageswaran on Thursday urged India Inc to scale up capital expenditure and align worker compensation with profitability growth to ensure the Indian economy sustains a growth trajectory of over 6.5 per cent and moves closer to its goal of becoming a developed nation by 2047.Speaking at a CII event, Nageswaran highlighted that the virtuous cycle of investment is critical not only for enhancing production capacity but also for job creation and boosting household savings.“We are facing this challenge that the growth in profitability has not only exceeded the growth in capital formation, but the growth in profitability has also trailed the growth in compensation, which includes hiring as well, and that is something that we can ill afford for the next 25 or 30 years,” he said, quoted PTI.Noting that such trends are usually associated with advanced economies, Nageswaran emphasized the need for course correction. Citing data, he said Indian private sector profitability jumped four times from Rs 7.2 lakh crore to Rs 28.7 lakh crore by March 2024, while capital formation rose only three times over the same period.“If we have to achieve a sustained 6.5 per cent growth minimum in real terms and aim for a higher growth rate then this gap has to close,” he added.The CEA also flagged the need for balanced deployment of capital and labour and massive investments in capacity creation, including infrastructure, over the next 25 years. He said sustainable capital formation will depend on rising household incomes and savings.Stressing the importance of policy support, he called for regulatory simplification. He also acknowledged that deregulation comes with its own challenges.“In fact, a significant share of regulatory overreach is sometimes due to the non-reciprocity of trust on the part of the private sector. Therefore, from our perspective, the ‘what’ of deregulation is clear, but ‘how’ becomes more challenging, because sometimes deregulation leads to unintended consequences of abuse as well,” Nageswaran said.For India to achieve the goals of ‘Viksit Bharat’ by 2047, he underlined the importance of a trust-based collaborative approach between the Centre, states, and the private sector.“We cannot achieve the kind of development that we hope to achieve in the next 25 years unless there is a collaborative approach, not just between Union and state governments, but also between governments around the country and the private sector,” he added.On the macroeconomic front, he reaffirmed that India is on track to sustain the 6.3-6.8 per cent growth projected in the Economic Survey, supported by good monsoons, government-led capital expenditure, tax relief, and a low-interest-rate environment.Nageswaran also commented on the currency outlook, predicting only a modest depreciation in the rupee.“Do not expect that the Indian rupee will necessarily be weakening as it did in the last 30 years… It is quite possible that we may have to deal with the challenge of living in an environment of a stronger currency rather than a weaker currency, because of international trends,” he said.
