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Industry bodies on Monday said the private sector might take up to 15 months to significantly deleverage its debt, and the public sector should use its surplus of over Rs 2 lakh crore to revive the investment cycle.
The chambers said this against the backdrop of economic advisors’ recommendation to the government to step up public investment, to revive economic growth, as the private sector had a huge debt overhang.
Assocham (Associated Chambers of Commerce and Industry of India) President Rana Kapoor said: “It will take another 15 months before a significant deleveraging of the private sector can happen. By March 2016, they will be back in action.”
Barring a few large conglomerates, there was high leverage in the private sector, especially in the infrastructure and core segments, he said.
Ficci (Federation of Indian Chambers of Commerce and Industry) Secretary-General Didar Singh said private sector investments would be forthcoming in areas like roads, power, airports and ports when economic growth goes up and issues like land acquisition and environment clearances are addressed.
Confederation of Indian Industry (CII) Director-General Chandrajit Banerjee said private sector investment must be further boosted, while the public sector could play a crucial role in driving investments.
Kapoor, who heads YES Bank, advised the government to take short-, medium- and long-term measures to rev up investments. Short-term measures, he said, would comprise actions for up to 90 days, medium-term for up to six months and long-term ones for more than a year. Besides, the government should review its target every 90 days and also check progress in new investments, he said. It already monitors stuck projects of over Rs 1,000 crore.
Kapoor said public-sector undertakings (PSUs), particularly the navratna and maharatna companies, should in the short to medium term use their surplus to perk up economic growth, which had slowed to a rate of 5.3 per cent in the September quarter from 5.7 per cent in the previous quarter.
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He said 20 central PSUs had about Rs 2 lakh crore of surplus. “PSUs of well-governed states should also chip in.” He said Assocham had made this recommendation in July this year as well.
Ficci’s Singh said a large number of engineering, procurement and construction (EPC) contracts would be bid by the private sector itself if the public sector and the government took a lead in driving investments. So, the private sector would not be absent from making investments, he added.
Besides EPC, he advised the government to give a push to annuity-based projects in the infrastructure segment. Singh said the private sector was not hesitant to investment and would be back to bid for projects, including those in public-private partnership (PPP) mode, when the issues were sorted out.
The Mid-Year Economic Analysis, penned by Chief Economic Advisor Arvind Subramanian and his team, blamed over-exuberant investment, especially in the infrastructure segment in the form of PPP, for slowing down investment in the country.
It said there were stalled projects to the tune of Rs 18 lakh crore (about 13 per cent of GDP), of which an estimated 60 per cent were infrastructure ones. This, the analysis said, reflected low and declining corporate profitability, as more than a third of firms had an interest coverage ratio of less than one (borrowing is used to cover interest payments).
CII’s Banerjee said boosting private-sector investments would require reviving large projects, addressing procedural bottlenecks, amending the land acquisition Act and promoting ‘ease of doing business’ parameters.
The analysis, though, said attracting new private investment, especially in infrastructure, was going to be a challenge, even if the backlog of stuck projects was cleared. In this context, it made a case for reviving public investment as one of the engines of growth, going forward.
