A Parliamentary panel has expressed concern over sluggish private investment despite a sharp rise in government capital expenditure, calling it a major challenge for the Indian economy. Parliamentary Standing Committee on Finance Chairman Bhartruhari Mahtab on Thursday said the issue was discussed extensively during a meeting of the panel with senior government officials, including Chief Economic Advisor V. Ananth Nageswaran.

Mahtab said the committee reviewed the evolving economic situation, including inflation, growth trends, foreign investment flows and global developments affecting India. “The challenge is that while government investment and capital expenditure are increasing, private investment is not picking up at the same pace. This is something that needs to be addressed,” the Lok Sabha MP said. The panel also discussed opportunities emerging from global companies seeking to diversify manufacturing operations away from China. Mahtab said India would need policy reforms and targeted support measures to attract such investments.

“That is a concern, and certain policy changes are required. We also need to decide what kind of support should be provided to companies moving out of China to help them set up industries in India,” he said. According to Mahtab, discussions also covered China’s recent industrial protection measures, inflationary pressures, the impact of the West Asia conflict and their implications for the global economy.

Despite global headwinds, the committee noted that India’s economic outlook remains positive, supported by improving domestic indicators. “Household savings have increased compared to last year, and investment is also rising,” Mahtab said. The panel further reviewed foreign direct investment trends and raised concerns over capital outflows despite robust inflows into India.

“While India is attracting large amounts of FDI, there is also a flight of investment from the country,” he said. Quoting the Chief Economic Advisor, Mahtab said such movements are cyclical in nature, with phases of increased inflows often followed by periods of outflows. He also pointed out that developed economies, particularly the United States, are currently attracting significant global investment. Rising interest rates in countries such as Japan are also influencing capital flows, he added.

On concerns over inflation due to the West Asia conflict, Mahtab said the government had already taken several measures, including the creation of a corpus fund, to address potential economic pressures. Responding to questions on the rupee, he said the Reserve Bank of India was taking steps to stabilise the currency. The Parliamentary panel is expected to meet again in the third week of June and prepare a report outlining key economic challenges along with policy recommendations for the government.

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