Parliamentary panel flags slow private investment amid rising govt capex

A Parliamentary panel led by Bhartruhari Mahtab voiced concern over private investment failing to match rising government capex, calling it a key challenge. The panel discussed policy changes to attract investment from China.

Private Investment Lags Govt Capex

A Parliamentary panel has raised concerns over private investment not keeping pace with government capex, with Standing Committee on Finance Chairman Bhartruhari Mahtab on Thursday saying the issue remains a key challenge for the Indian economy even as public capital expenditure continues to rise.

Speaking to ANI after a meeting of the Parliamentary Standing Committee on Finance today, the Lok Sabha MP Mahtab said the panel reviewed the evolving economic situation, including growth trends, inflation, foreign investment flows and global developments impacting India. "The challenge is when government investment is increasing, capital investment is growing, private investment is not picking up in that line. That is a challenge which we have to address," Mahtab told ANI.

Attracting Firms Leaving China

The committee met senior government officials, including the Chief Economic Advisor, V Ananth Nageshwaran and discussed both domestic and international factors influencing economic performance. A significant part of the discussion focused on China's policy environment and the opportunities for India to attract companies seeking to diversify their manufacturing bases away from China.

Highlighting the issue, Mahtab said, "That is a concern. And for that certain policy changes are required. At the same time, those who are moving out of China, what type of support we will be providing them in our country to set up their industry, that is also something."

He also pointed to recent policy measures adopted by China and their potential implications for global industry and investment flows. "The Chief Economic Advisor had taken up the subject relating to evolving economic situation that this country has been going through. Elements of price rise, inflation, West Asia conflict. Recently, China has made a very stringent law protecting their industries. All these aspects were deliberated today," he said.

Encouraging Outlook and Domestic Fundamentals

Despite global uncertainties, Mahtab said India's economic outlook remained encouraging and several indicators pointed towards strengthening domestic fundamentals. "Despite the serious headwinds, India's economy is also emerging in a better way. There are certain very good indicators, where household savings have also increased in comparison to last year. So in that respect, investment is also increasing," the Lok Sabha MP said.

FDI Inflows and Outflow Concerns

The committee also discussed foreign direct investment (FDI) trends, including concerns over capital outflows despite strong inflows into the country. "Major concern was when we are attracting FDI in large numbers, there is also a flight of FDI from our country," Mahtab said.

Referring to the Chief Economic Advisor's assessment, he added, "What the chief economic advisor mentioned is that this is cyclic in nature. In three years time when investment increases, foreign direct investment increases, but in another three years there is also a flight."

Global Factors Influencing Capital Flight

Mahtab noted that developed economies were increasingly attracting global capital. "Today United States is attracting foreign direct investment in large number. Large number of people who are doing investment in other countries are finding investments in America more resourceful," he said.

He further said rising interest rates in developed countries were influencing capital movements. "When Japan had zero interest in their savings, now they are providing two per cent and three per cent interest on certain bonds. So, flight of money also is happening to those developed countries," he said.

Inflation and Rupee Concerns

On concerns over inflationary pressures arising from the West Asia conflict, Mahtab said the government had already initiated measures to address potential impacts. "The government has taken number of steps. They have provided corpus fund for it and they will also meet it," Mahtab said.

Responding to a query on the Rupee, he said, "Yes, that was one of the concern and RBI is taking steps to control."

Committee's Future Action Plan

The committee is scheduled to meet again in the third week of June and prepare a report outlining key economic challenges and policy recommendations. "The committee has decided to meet again towards third week of this month. And also we will be preparing a report. Report not only describing the problems that we face, but also we will be providing certain solutions what the government should consider," Mahtab said. (ANI)

(Except for the headline, this story has not been edited by Asianet Newsable English staff and is published from a syndicated feed.)