The more robust way to reviving investment is to combine off-Budget ways to step up public investment with quick actions to improve the climate for private investment.
As the quarterly results season got under way, there were expectations that the October-December period would see a general turnaround in corporate performance, based on a number of positive drivers.
A general sense of confidence about policy and improving macroeconomic conditions, which in turn have been due significantly to softening energy and commodity prices were seen as boosting both top lines and bottom lines, both absolutely necessary to get the investment cycle moving again.
The Infosys results, which traditionally kick off the series, provided a boost to the markets.
However, as analysts put companies under deeper scrutiny, the scenario is turning out to be somewhat less rosy than previously thought.
As reported in this newspaper last week, a survey of analysts from leading research houses indicates that year-on-year sales for the 50 companies comprising the Nifty index will actually shrink 1.75 per cent, while profits will grow by a measly 1.44 per cent.
The former is actually not entirely negative; it partly reflects the fact that inflation has moderated.
However, what it does say is that revenues in real terms are virtually stagnant, suggesting that the macroeconomic recovery is yet to manifest in performance.
On profitability, even with stagnant sales, lower input prices should result in higher margins.
That this is not likely to happen, at least for now, may reflect some factors offsetting the overall decline in input prices - valuation losses on inventories and exchange rate movements, to name just two.
Of course, the survey also indicates that the picture will be quite varied across sectors.
Consumer goods and banks are expected to have done relatively well.
The former may have benefited from the increase in discretionary spending power among consumers, as a result of lower food and energy prices.
The latter are yet to see any pick-up in lending, but will have gained from treasury operations.
On the other hand, sectors like realty, metals and others related to them are expected to show subdued results.
These are mostly important cyclical sectors, which again underscores the fragility of any recovery at this point in time.
While the government may take some comfort from the macroeconomic data, these patterns should be a source of concern.
Even against a favourable backdrop, growth is neither going to accelerate nor sustain itself without a sharp upturn in investment spending.
Private investment will not do this unless top-line and bottom-line growth warrants it.
In the meantime, the gap can only be filled with public investment.
The finance ministry has already signalled that it believes this is the solution for the infrastructure problem.
It will have a wider growth impact as well, by stimulating demand.
But all these are simply aspirations, held in abeyance by the intractable fiscal problem.
While some have expressed the view that the deficit targets under the resurrected fiscal responsibility and budget management process need to be subordinated to the more pressing investment compulsions, this would be the wrong way to go.
The last thing the government needs in the first year is to lose its fiscal credibility.
The more robust way to reviving investment is to combine off-Budget ways to step up public investment with quick actions to improve the climate for private investment.
A lot is indeed riding on the next Union Budget.
