Consumption Revival During Festive Season To Define India’s Growth Path, Says Bain India

India's economic growth story will rest upon consumption picking up during the ongoing festive season, which might instill confidence in the private sector to bring back investments, Sri Rajan, chairman, Bain and Company India, told BloombergQuint.

The October-December quarter will be an important marker in understanding if India is on the growth path or not, he said on the sidelines of the India Economic Summit of the World Economic Forum (WEF). “Specifically, what happens with consumption during this festive season is going to be very important to figure out what's happening to the economy,” he added.

India's economy is facing its worst slowdown in three years due to one-off disruptions like demonetisation and the Goods and Services Tax implementation. The private sector has shied away from capital spending due to mounting corporate debt, and under-utilised capacity at factories. Government finances, too, remain constrained as it front-loaded its spending attempting to kickstart the investment cycle.

Rajan said that he had expected the private investment cycle to have started by now, but then the two disruptions happened. The private sector would not start putting in money as long as there is an improvement in the capacity utilisation of plants, which weakened to 71.2 percent in the April-June quarter. He added that a recovery in private sector spending is at at least a year away.

Rajan hopes that a good festive season would bring confidence in the economy that India is on the growth path, and might spur back investments.

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