As private investment picks up, ‘animal spirit’ back in economy: CEA

New Delhi, Feb 6 (PTI) Chief Economic Adviser (CEA) V Anantha Nageswaran has said the animal spirit is back in the Indian economy and has reflected in the visible pick up in private sector investment.

"It has come back. Otherwise, how Indian economy can grow at 7 per cent. You look at Purchasing Managers' Index, manufacturing and services indices, the line between expansion and contraction, stock market performance," he told PTI in an interview.

It has come back, and that is reflected in the GDP numbers, he added.

The expression 'animal spirits' was coined by celebrated economist John Maynard Keynes to refer to investors' confidence in taking action in terms of investment.

Listed companies in the private sector were beginning to ramp up their capital spending and new project announcements, Nageswaran said, citing data from the Reserve Bank of India.

Even Finance Minister Nirmala Sitharaman in her interim Budget said that private investment is happening.

"Now, that the private investments are happening at scale, the lower borrowings by the central government will facilitate larger availability of credit for the private sector," she said while presenting the interim Budget for 2024-25.

With the growth in the economy, there has been a pick-up in private investment in recent times in some of the sectors like steel, cement and petroleum.

Both, corporate and banking sector balance sheets, have room to take more risk, assuming India's real GDP grows at 7 per cent in FY25, he said.

India Inc. deleveraged its balance sheet before and during the COVID-19 period so they have the capacity to borrow for expansion.

At the same time, banks' financial strength improved with an average Capital Adequacy Ratio of around 15 per cent for the public sector banks (PSBs).

Capital Adequacy Ratio, Bank of Maharashtra, with 16.85 per cent, is the highest amongst PSBs followed by Indian Overseas Bank at 16.80 per cent and Punjab & Sind Bank at 16.13 per cent at the end of the third quarter of the current fiscal.

PNB had the highest quarterly net profit growth with 253 per cent growth (Rs 2,223 crore), followed by Bank of India with 62 per cent growth (Rs 1,870 crore) and Union Bank of India with 60 per cent rise (Rs 3,590 crore).

However, three lenders -- SBI, UCO Bank and Punjab & Sind Bank -- reported a fall in net profit by 35.49 per cent, 22.97 per cent and 69.44 per cent, respectively. PTI