Weeks before Budget, CEA Nageswaran warns govt capex can't keep rising at same pace

Capital expenditure by the public sector cannot keep increasing as rapidly as it has in recent years, Chief Economic Adviser V Anantha Nageswaran has said.

Speaking in the Capital on December 9 at the Confederation of Indian Industry's Global Economic Policy Summit, Nageswaran said the last decade had seen the total investment by the public sector – including the Centre, states, public sector enterprises, and capital expenditure that is part of revenue expenditure – rise by three-and-a-half times to Rs 21.2 lakh crore. This, according to the government's top economist, had helped growth at a time when the private sectors, including banks, were repairing their balance sheets.

"So we need to obviously, at some point in time, decide whether we continue to scale up the investment at the same pace or allow the private sector to start functioning as the primary engine of capital formation in the economy, for which all of us have been waiting for."

"It may not be necessary or may not be healthy for the public sector to keep expanding the capital investment at the same pace. Capital expenditure has to continue to increase, but not at the same pace because we should not only be not crowding out the private sector but ensuring that the combined investment spending by the public and the private sector should not drive up the cost of capital too much for the economy," Nageswaran added.