Chief Economic Adviser (CEA) V Anantha Nageswaran has remarked that the animal spirit has returned to the Indian economy, evident in the notable increase in private sector investment, as per a report by The New Indian Express.
"It has returned. Otherwise, how could the Indian economy grow at 7 per cent? Look at the Purchasing Managers' Index, manufacturing and services indices, the line between expansion and contraction, and the stock market performance," he shared with PTI during an interview.
"This resurgence is evident in the GDP numbers," he emphasised.
The term 'animal spirits' was coined by renowned economist John Maynard Keynes to describe investors' confidence in making investment decisions.
Nageswaran pointed out that listed companies in the private sector are starting to enhance their capital spending and announce new projects, referring to data from the Reserve Bank of India.
Finance Minister Nirmala Sitharaman also acknowledged private investment in her interim Budget, stating, "Now that private investments are occurring on a large scale, reduced borrowings by the central government will facilitate greater credit availability for the private sector."
With economic growth, there has been a rise in private investment in sectors such as steel, cement, and petroleum.
Nageswaran predicted that if India's real GDP grows at 7 per cent in FY25, both corporate and banking sector balance sheets can take on more risk.
During and before the COVID-19 period, India Inc. improved its balance sheets, providing room for expansion borrowing.
Simultaneously, banks' financial strength has improved, with public sector banks maintaining an average Capital Adequacy Ratio of around 15 per cent.
Bhuvan Krishna is Staff Writer at Swarajya.
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