Capex cannot be driven by public investment, says industry body Assocham

Industry body Assocham said capital expenditure cannot be driven largely by public investment and the private sector must participate to increase investments in India's economy

Industry body Assocham on Monday said capital expenditure cannot be driven largely by public investment and the private sector must participate to increase investments in India's economy.

Prime Minister Narendra Modi last month urged India Inc to increase investment in tandem with the government's decision to raise capital expenditure (capex) and take advantage of the opportunities unveiled in the Union Budget 2023-24.

The chamber's newly appointed President Ajay Singh said he foresees a "significant rise in private investment" in the coming 2-3 years, driven by the Centre's capex push.

"It cannot be that expenditure in the economy is largely public expenditure. The private sector has to participate and with the environment that is being created today, with the infrastructure spend that the government is doing, opportunities available to companies both in India and overseas. I think you will see an uptick in private investment in the next 2-3 years," Singh said addressing a press conference.

Singh, also the Chairman and Managing Director of Spicejet, said he believes the private sector has begun to realise that it needs to seize India's moment.

The Assocham President also said it was time for the RBI to push the pause button to the hike in repo rates as sectors like auto and housing need a signal that interest rates are easing.

"RBI has done a fabulous job in the way they have managed interest rates. We do feel, however, that at this time, any further hike in interest rates is possibly going to have a somewhat adverse impact on certain sectors. Therefore, our suggestion would be to consider carefully before any further hikes," Singh said.

Asserting that several pandemic-hit MSMEs were unable to pay statutory dues on time, the Assocham President said it will urge the government to give concessions on interest rates to such units.

"We will be suggesting to the government that as many of these companies were unable to pay on time, statutory charges and various dues to government authorities, we would request moderation of charges, the interest that the government charges on such delayed payments," he said.

Further, he said several Assocham members have raised the issue of timely payments by the government authorities to them which remains a cause of concern.

"We will certainly try and play the role of that bridge take some of those problems to the government for solutions," Singh said.

Responding to a related query, he said a significant part of those dues are outstanding from the PSUs and government agencies.

The Spicejet Chairman and Managing Director observed that while Value Added Tax (VAT) on Aviation Turbine Fuel has come down significantly, except in four states, including Tamil Nadu, West Bengal, Assam and Delhi.

"Every other state, including states like Karnataka and Maharashtra where there is a large offtake of aviation fuel have reduced VAT from 28 per cent to 18 per cent and hopefully we will find a way to reduce it further," Singh said.

He argued that lower VAT on ATF certainly assists the aviation sector.

"It (high VAT on ATF) was an anomaly that the aviation sector in India which has fantastic potential for growth is getting hamstrung by the fact that fuel rates are so high," he added.

Singh also said, "I think this government has shown quite brilliantly that they don't really care about sops at election time... we would like to see them carry on the same path, moderate taxation, increase investment, try and improve the ease of doing business.