Covid could push India’s growth model from consumption to investment
The Covid-19 pandemic could serve as an inflection point to shift India’s growth model from a logic of consumption to a logic of investment.
In its Ecoscope report, Motilal Oswal Financial Services said: “With Covid-19 hurting India’s ‘Home’ (HH) and ‘Government’ sectors, the continuity of strong consumption growth is in question. . ”
âOn the contrary, with the improving financial position of listed companies and a slight increase in household investment in the real estate sector (referred to as physical savings), the narrative of an investment-led recovery is gaining momentum. “
The report ordered various economic actors – households, governments, listed companies and unlisted companies – to increase their investments in fixed assets in the immediate future according to their financial situation.
At present, the listed and unlisted business sector accounts for only about half of total investment in India.
The âHHâ sector, including unincorporated businesses, accounts for 35-40% of India’s investment, while the remaining 12-13% comes from central and state governments.
In addition, the report indicated that the demand environment is expected to remain subdued due to the weak financial position of âHHâ and the public sector.
“Despite a strong recovery in household investment in 2HFY21, given that Indian households suffered the brunt of the losses caused by Covid during CY20 (and CY21), we believe household spending will remain subdued over the next few years. years. “
He further pointed out that unless âHHâ, âUnlisted companiesâ and government sectors can improve their financial situation – resulting in increased demand – a strong recovery in investment seems difficult.
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