Those expecting a quick turnaround in growth are likely to be disappointed. A new report for CRISIL argues that India is facing a shortage of demand.
And while the Narendra Modi government is addressing the issue of 'policy paralysis' and is fast-tracking decision, making and improving the ease of doing enablers, these are mere growth enablers.
They cannot push up demand in the short-term and the revival of private investment might take 18 months down the line.
In the short-term, the report notes: "There is little that can be done to engineer a quick revival in demand", indicating that the government has little ammunition left.
The Infrastructure sector remains a concern. Crisil notes that despite many private players selling off assets or lining up to do so, paring down their debt will take some time. Banks, too, already saddled with high levels of non-performing assets (NPAs) which Crisil expects to rise, are wary of lending to the sector. Thus private investments in the sector are unlikely to propel growth, leaving the public-sector to shoulder the burden of investment.
In manufacturing though, the pickup in investments depends on how quickly demand increases. But this is where the concern lies. Despite consumption linked sectors doing better than investment linked ones, capacity utilisation levels remain low.
