Centre following capex-driven plan to boost economy: Krishnamurthy Subramanian

S&P Global Ratings believes willingness to invest will stay strong across Asian markets, though it may be delayed because of fresh Covid waves in some countries, particularly India, the ratings agency said on Tuesday.

The government is following a capex-driven strategy to boost economic activity in the country, the chief economic adviser in the finance ministry, Krishnamurthy Subramanian, said on Tuesday.

Chief Economic Advisor Krishnamurthy Subramanian. (PTI)

Gross fixed capital formation (GFCF), which represents investment demand in the economy, increased almost 30% and as a result of this, the ratio of GFCF to gross domestic product (GDP) was 34.3%, the highest in last 26 quarters, though a lot of it was government capex (capital expenditure), Subramanian said, citing the FY21 March quarter GDP data.

“The two key spillover effects (of the spurt in GFCF) was consumption after having declined for three quarters because of both the pandemic-induced restrictions and pandemic-induced risk aversion, grew by 2.7% in the fourth quarter. Second, contact sensitive sectors, which were affected across the world because of the pandemic and declined in high double digits in the previous three quarters, declined by only 2.3% in the fourth quarter. This is quite important to illustrate the linkages that are there at the macroeconomic level from investment to consumption and service sector activities as well,” Krishnamurthy Subramanian said at a webinar jointly organized by the Institute for Studies in Industrial Development and the United Nations Conference on Trade and Development.

S&P Global Ratings believes willingness to invest will stay strong across Asian markets, though it may be delayed because of fresh Covid waves in some countries, particularly India, the ratings agency said on Tuesday.

“The top risk facing emerging market economies is a slower-than-expected rollout of the vaccines,” S&P’s economists said.