Private sector to lead India’s economic revival: Crisil

Private sector accounts for three-fourths of India's gross domestic product (GDP) and the country's economic turnaround depends on reviving private consumption and investment, Crisil Research has said.

The government can act as a facilitator in boosting private investment by pursuing the next level of economic reforms and removing policy bottlenecks, according to Crisil.

This is because, unlike during the 2008 crisis, the public sector in the country is not in a position to provide the necessary impetus for growth due to the government's own fiscal constraints.

While the fiscal deficit has made increased spending difficult for the government, public sector firms are also facing constraints in pushing investments in difficult times.

''In the two decades since 1990, public sector GDP growth remained stagnant at 6 per cent, whereas private sector GDP growth went up to 7.7 per cent in the 2000s from 5.7 per cent in the previous decade. The private sector's performance during the high growth phase of the economy from 2004-05 to 2007-08 was even more impressive, as it logged 9.7 per cent GDP growth per year. Private corporate investments, too, had surged to 17.3 per cent of GDP from 10.3 per cent of GDP during this period,'' Crisil Research said in its recently released report titled ''Why is it critical to revive the private sector?''

The global financial crisis in 2008 hit private sector investment through a drying up of investible funds. Investments by the private corporate sector slumped to 11.3 per cent of GDP in the crisis year 2008-09 from 17.3 per cent in the preceding year. If India came through largely unscathed from the effects of the financial crisis, it was mainly due to the impetus from the public sector, the report said.