Is The Long Wait For Private Investment Over?

Source– The post is based on the article “Is the Long Wait For Private Investment Over?” published in Times of India on 15th September 2022.

Syllabus: GS3- Indian Economy.

Relevance– About investment

News- The article explains the current scenario of investment in India.

There are favourable macroeconomic indicators that can lead to higher investment in the fiscal year 2023.

What are the macroeconomic indicators which are not favourable?

Gross Fixed Capital Formation that is private investment, was at its peak at 34.3% in 2012-13. It has been in the range of 30-32% since that time.

Share of the manufacturing sector in GDP remains below the stated government policy of 25%. It was 17.4% in 2020.

Labour force participation rate was below 40% in 2022.

What drives private investment in India?

Government capital expenditure is insignificant to drive private investment.

External causes had a negative impact on the investment cycle in recent years. It explains the need for durable growth and demand outlook to spur private investment.

What are the factors conducive to private investment?

Balance sheets of both corporates and banks have improved. Both corporate debt to GDP ratio and NPAs have declined.

Central government policy of high capital expenditure can create a strong multiplier effect for the economy.

Corporate profitability is at a high despite higher input cost pressures.

Capacity utilisation is improving. It was at 74.5% in March 2022 and surpassed the pre-pandemic level.

At 15.1% in July 2022, credit growth is highest in nearly 2.5 years.

According to RBI’s Industrial Outlook Survey, business confidence among corporates has recovered well above pre-pandemic levels.

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