Subhash Chandra Garg Reform Action Plan-II: Steps needed to improve investment rates

subhash chandra garg committee

New Delhi, Nov 7 : Former Finance Secretary Subhash Chandra Garg, who demitted office last month, has said serious policy and programme measures are required to make the infrastructure sector attractive in order to kick-start the investment cycle in the private sector as investment rates have fallen to less than 30 per cent for over 7 years now.

The senior bureaucrat, who was shifted out of the Finance Ministry just after the general Budget in July this year, has said in a report that India’s investment rates have fallen to less than 30 per cent and such low investment rates are persisting for more than seven years now and are far lower than China.

“Our investment rates exceeded 35 per cent for some quarters during 2005-2014. China averaged investment growth rate in excess of 40 per cent for 25 years (1993-2018) with a peak of 48 per cent and still is clocking over 44 per cent of investment growth rate. While slowdown in housing and construction investment started about 7-8 years ago and is still persisting, there is slowdown in road highways, power generation and telecommunications now. Most infrastructure enterprises are still with the Government – railways, roads, coal and power,” he said.

The Congress-led UPA Government was in power in the period 2009-14.

“Government’s investment capacity, including that of the public sector, is severely limited. Quite a few sectors where private sector investment was flowing in earlier have become unattractive for private sector for different reasons – highways (unviability), Telecom (regulatory excess), Residential Housing (capital appreciation disappearing), Power (unavailability of coal),” he noted.

“Serious policy and programme measures required to make these sectors attractive to kick-start the investment cycle in the private sector,” said the ex-Secretary.

But for raising investment, he said domestic savings must grow.

“For investment rate to rise, we need both the domestic savings rates to go up and transfer of savings from the rest of the World. As India would need to keep up growth of consumption, India’s savings will find it difficult to grow beyond 32-35 per cent. This requires 5-8 per cent of India’s GDP to come as external savings transfer “he said.

The former Economic Affairs Secretary said for investment rates to improve, “we will need serious reforms for private sector to make investments. Reforms and ambitious investment programme required across infrastructure, digital economy, important service sectors like health, education and travel, significant ‘Make in India’ sectors like electronics, defence production and automobiles and in waste management would be needed”.

Infrastructure has massive investment requirement in India – energy: oil & gas, coal & power, transportation: railways, airports & roads, and real estate: most in residential and rural, agriculture and hills, his report said.

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