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Source: This post has been created based on the article “Investment: The Dog That Didn’t Bark” published in the Times of India on 5th October 2023.
UPSC Syllabus Topic: GS Paper 3, Indian Economy – Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
News: The article discusses the growth of Investment in the post-pandemic Indian economy and the role of the various sectors in fueling this growth.
The growth rate of the First Quarter of FY24 GDP has been calculated at 7.8%. It also means that the gross capital formation, or investment, continued to move upward.
Investment has shown an increase from ₹55 lakh crore in 2020-21 to ₹85 lakh crore in just two years, showing remarkable recovery.
Investment subset of the expenditure component of GDP (which includes consumption (public and private), investments and net trade) has grown at a faster pace compared to the other components since 2020.
What are the driving forces behind revival of Investment in India?
Role of the Industry sector: With a 32% share in total incremental investment, the industry sector is leading the post-pandemic renewal of investments. Initiatives like the PLI scheme have led to growth in investments in the manufacturing sector.
Public, Private and the Household sector:
Public sector: Has shown a reversal of the declining trend of public investments: Since 2021-22, an additional ₹1 lakh crore has been invested, on the back of a push by the government.
Private sector: Private corporate sector investment has already surpassed the pre-pandemic levels.
Household sector showing rising investment trends: Household investment in physical assets is showing a positive trend with housing loans forming the majority of retail loans in the current fiscal. This is good news for overall investment trends in the household sector.
Since this sector reflects conditions in the informal sector to a large extent, it disproves the claim that the informal sector is not doing well.
What is the future of investment in India?
Strong Demand Ahead: Order book position of PSUs (which reflects all the orders placed by a company) has shown an increase.
Robust Performance of the Private sector: Private sector announced higher operating profitability.
Positive overall investment trends in the Household sector.
Way Forward:
As highlighted by the author, contrary to widely shared perceptions the public sector has been lagging in capital expenditure compared to the private sector. A coordinated participation of the various sectors will ensure the full recovery of capital expenditure in India, which is crucial for economic growth.
