{"id":197161,"date":"2022-07-25T13:55:30","date_gmt":"2022-07-25T08:25:30","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=197161"},"modified":"2022-07-25T13:55:30","modified_gmt":"2022-07-25T08:25:30","slug":"weighing-in-on-indias-investment-led-revival","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/weighing-in-on-indias-investment-led-revival\/","title":{"rendered":"Weighing in on India\u2019s investment-led revival"},"content":{"rendered":"\n

Source:<\/strong> This post is created based on the article \u201cWeighing in on India<\/strong>\u2019s investment-led revival\u201d<\/strong> published in The Hindu<\/strong> on 25th<\/sup> July 2022<\/strong>.<\/p>\n

Syllabus<\/strong>: GS Paper 3 \u2013 Economy \u2013 Issues related to growth and development<\/p>\n

News<\/strong>: Recently, India\u2019s Finance minister addressed third G20 Finance Ministers and Central Bank Governors (FMCBG) meeting. She said that India\u2019s long-term growth prospects are embedded in public capital expenditure programmes. Thus there is a need to analyse trends in government\u2019s investment policies and their impacts.<\/p>\n

The phases of Public investment-led economic growth in India <\/strong><\/h5>\n

India\u2019s post-Independence economic growth <\/strong>was led by the public investment. <\/strong><\/p>\n

During Asian financial crisis of 1997<\/strong>, the then government initiated public road building projects. These projects led to\u00a0an investment and export-led boom in the 2000s.<\/p>\n

The project were Golden Quadrilateral<\/strong> (to link metro cities using a high-quality road network) and the Pradhan Mantri Gram Sadak Yojana<\/strong> (to \u2018provide good all-weather road connectivity to unconnected habitations\u2019).<\/p>\n

However, in<\/strong> 2010s,<\/strong> real Gross Fixed Capital Formation (GFCF) rate declined, which saw a rise to 32.5% in 2019-20<\/strong> from a low of 30.7% in 2015-16. This trend continued even during pandemic years.<\/p>\n

Between 2014-15 and 2019-20,<\/strong> the shares of agriculture and industry<\/strong> in fixed capital formation\/GDP fell from 7.7% and 33.7% to 6.4% and 32.5%, respectively. Whereas the share of services<\/strong> rose from 49% in 2014-15 to 52.3% in 2019-20.<\/p>\n

What are the present issues in the present Public investment-led economic growth strategy?<\/strong><\/h5>\n

The budgetary definition of investment refers to financial investments<\/strong>. It include purchase of existing financial assets, or loans offered to States. Thus, it is not just capital formation<\/strong> representing an expansion of the productive potential.<\/p>\n

The National Accounts Statistics suggests that over 90% of Gross Capital Formation (GCF)<\/strong> consists of fixed investments. However, the productive potential of investment depends on its composition.<\/p>\n

Within the service sector<\/strong>, although investment in roads and communications rose, but declined in industries and agriculture<\/strong>. There is a need for balance between \u201cdirectly productive investments\u201d<\/strong> (in farms and factories) and infrastructure investments.<\/p>\n

Although a good amount of time and resources were dedicated to improve ease of doing business in India under\u00a0\u2018Make in India\u2019 campaign<\/strong>. However, it didn\u2019t result in a boost to industrial investment, let alone foreign investment.<\/p>\n

The contribution of foreign capital <\/strong>to financing GCF fell from 3.8% in 2014-15 (or 11.1% in 2011-12) to 2.5% in 2019-20.<\/p>\n

The lack of domestic capacity<\/strong> for essential raw industrial materials and capital goods could prove costly.<\/p>\n","protected":false},"excerpt":{"rendered":"

Source: This post is created based on the article \u201cWeighing in on India\u2019s investment-led revival\u201d published in The Hindu on 25th July 2022. Syllabus: GS Paper 3 \u2013 Economy \u2013 Issues related to growth and development News: Recently, India\u2019s Finance minister addressed third G20 Finance Ministers and Central Bank Governors (FMCBG) meeting. She said that… Continue reading Weighing in on India\u2019s investment-led revival<\/span><\/a><\/p>\n","protected":false},"author":10308,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[216,10498],"class_list":["post-197161","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-3","tag-the-hindu","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/197161","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10308"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=197161"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/197161\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=197161"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=197161"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=197161"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}