The Missing Growth Driver

Persistently low investment rate is a big concern; growth revival difficult without major reforms

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The loss of pace of government capital expenditure after the post-pandemic vibrancy was inevitable. Though the immediate reason for the deceleration was an urgent need to rein in the fiscal deficit, it also marked the limitation of public capex as a long-term growth driver. Unless the overall investment rate, mostly a function of household savings, private-sector capex, and net capital inflows, is high, the growth levers will falter, and the much-desired sustained high rate of expansion of the economy will become impossible. Private consumption is the largest expenditure component of India's gross domestic product (GDP), but it is difficult to maintain its strength over longer terms, without solid support from gross fixed capital formation (GFCF).