Frontloading government spending will drive private investment and support economic recovery: Report

The government should prioritize executing infrastructure projects and frontload its spending during the first half of fiscal year starting April 1, to encourage private investment and support economic recovery, says a report.

According to Dun & Bradstreet's latest Economy Observer, new private investment is also likely to remain constrained in the near term given that revival of both domestic and external demand remains uncertain.

"The government should prioritize executing the infrastructure projects and frontload its spending during H1 of FY22 to encourage private investment. This along with the increase in hiring of employees by firms would support the recovery of demand," said Arun Singh, Global Chief Economist, Dun & Bradstreet.

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According to the D&B Covid-19 Commerce Disruption Tracker, as of end-January 2021, only 31 per cent of businesses in India remained disrupted, an improvement when compared to the July 2020 data of 81 per cent, and also over other major countries like the US, the UK or Germany.

"However, as we closely monitor the firm level disruption, the scenario could change depending on the rise in the number of cases and pockets of lockdown announced in certain states. It is the pace of recovery of the consumption demand that will determine the shape of recovery for the economy," Singh said.

The report further noted that the growth in Index of Industrial Production (IIP) is yet to stabilize due to heightened uncertainty on domestic and external demand.

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Dun & Bradstreet expects the IIP to have grown by 1.0 per cent - 1.5 per cent during January 2021.

On the prices front, the report said, despite moderation in the prices of food articles, increase in oil prices and producer prices is expected to keep inflation higher in the month of February 2020.

As per the report, Consumer Price Index (CPI) is expected to be in the range of 4.8- 5 per cent and Wholesale Price Index (WPI) is likely to be in the range of 3- 3.2 per cent during February 2021.