{"id":247254,"date":"2023-06-09T19:54:24","date_gmt":"2023-06-09T14:24:24","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=247254"},"modified":"2023-06-09T19:54:24","modified_gmt":"2023-06-09T14:24:24","slug":"investment-the-next-big-story","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/investment-the-next-big-story\/","title":{"rendered":"Investment: The Next Big Story"},"content":{"rendered":"\n

Source<\/strong>: The post is based on the article\u00a0\u201cInvestment: The Next Big Story<\/strong>\u201d published in The Times of India <\/strong>on\u00a09th<\/sup> June 2023<\/strong>.<\/p>\n

Syllabus: GS 3 \u2013 Indian Economy \u2013 Growth & Development<\/strong><\/p>\n

Relevance: <\/strong>About the factors behind increasing investment rates<\/strong><\/p>\n

News<\/strong>: The article explains factors behind the increasing investments rates in India.<\/p>\n

What is investment and what are its impacts?<\/strong><\/h2>\n

At an aggregate level<\/strong>, investment refers to spending by economic agents (households, private corporations and government) on creation of capital assets.<\/p>\n

In the short run<\/strong>, investment influences GDP via the transactional impact of generation of capital assets while in the longer run<\/strong>, it boosts the productive capacity of the economy and increases overall efficiency.<\/p>\n

What has been India’s investment story?<\/strong><\/h2>\n

India\u2019s share of investments in GDP (investment rate) peaked at 35.8% in 2007-08, while it dropped to 27.3% in 2020-21 due to the pandemic.<\/p>\n

However, the investment rate has recovered to 29.2% in 2022-23. Further, the investment rate attained a level of 31. 7% on a standalone basis during January-March 2023, the highest in the last 35 quarters.<\/p>\n

What caused the rise in the investment rate?<\/strong><\/h2>\n

First,<\/strong> the government implemented counter-cyclical fiscal policy to support the economy when the private sector withdrew due to uncertainty.<\/p>\n

The government’s budgetary capital spending has jumped from its pre-Covid level of 3.6% of GDP in 2019-20 to 4.9% of GDP in 2022-23, the highest since the Global Financial Crisis in 2008.<\/p>\n

Second,<\/strong> the government has tried to retain focus on long term macro-stability while announcing structural measures to revive investments.<\/p>\n

For example,<\/strong> the National Infrastructure Pipeline, National Monetisation Programme, Gati Shakti, etc. has attempted to improve the business climate.<\/p>\n

Third,<\/strong> with the RBI\u2019s intervention, the twin balance sheet syndrome<\/strong>, which was a burden on both the corporate sector as well as the banking sector, has now improved.<\/p>\n

As per CMIE data<\/strong>, the non-financial sector\u2019s debt has declined sharply from 16.8% in 2020-21 to 10. 7% in 2022-23. This has helped boost profitability in the corporate sector.<\/p>\n

This improvement has translated into better asset quality for the banking sector. As per RBI data<\/strong>, the gross NPA ratio of all scheduled commercial banks reduced from 11.2% in FY18 to 5.0% in September 2022.<\/p>\n

Fourth,<\/strong> Normalisation of economic activity after the pandemic has also pushed up investments.<\/p>\n

Fifth, <\/strong>geopolitical preference of \u2018China Plus One\u2019 strategy has benefited countries like India, Vietnam and Bangladesh in attracting and boosting investments.<\/p>\n

Sixth,<\/strong> input price inflation has shown signs of moderation. For instance,<\/strong> the price of the Brent crude oil has decreased from the previous year. This decline would help lower WPI inflation.<\/p>\n

What can be the way ahead?<\/strong><\/h2>\n

The global economic downturn and strong tightening of interest rates over the last year have created near-term cyclical headwinds. These factors may temporarily slow down the pace of investment rate.<\/p>\n

However, according to the IMF,<\/strong> India has had one of the strongest post-Covid gains in investment rate, and it likely to outperform peer groups in the long run. Therefore, we can continue to expect the investment rate to increase further.<\/p>\n","protected":false},"excerpt":{"rendered":"

Source: The post is based on the article\u00a0\u201cInvestment: The Next Big Story\u201d published in The Times of India on\u00a09th June 2023. Syllabus: GS 3 \u2013 Indian Economy \u2013 Growth & Development Relevance: About the factors behind increasing investment rates News: The article explains factors behind the increasing investments rates in India. What is investment and… Continue reading Investment: The Next Big Story<\/span><\/a><\/p>\n","protected":false},"author":10320,"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":[216,10496],"class_list":["post-247254","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-3","tag-times-of-india","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/247254","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\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=247254"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/247254\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=247254"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=247254"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=247254"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}