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Covid might shift India's growth model
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SME Times News Bureau | 19 Sep, 2021
The Covid-19 pandemic could act as an inflection point to shift India's
growth model from being consumption driven to investments-led.
In
its Ecoscope report, Motilal Oswal Financial Services, said: "With
Covid-19 hurting India's 'Household' (HH) and 'Government' sectors
adversely, the continuity of strong consumption growth is in question."
"On
the contrary, with listed companies' financial positions improving and
an uptick in household investments in the Real Estate sector (called
physical savings), the narrative of investment-led recovery is gaining
momentum."
The report prescribed that various economic
participants - households, governments, listed companies, and unlisted
corporates -- to increase their fixed asset investments in the immediate
future based on their financial position.
At present, the listed and unlisted corporate sector accounts for only about half of total investments in India.
The
'HH' sector including unincorporated enterprises accounts for 35-40 per
cent in India's investments, while the remaining 12-13 per cent is
contributed by centre and states governments.
Besides, the report
cited that demand environment is expected to remain subdued due to weak
financial position of 'HH' and government sector.
"Despite
household investments picking up strongly in 2HFY21, given that Indian
households bore the maximum brunt of Covid-led losses in CY20 (and
CY21), we believe household spending would remain subdued over the next
few years."
It further pointed out that unless 'HH', 'Unlisted
Corporate', and government sectors can improve their financial positions
-- leading to a demand uptick -- a strong revival in investments seems
challenging.
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