India’s pvt investment puzzle

Picked up from lows of 2016 and 2017 but yet to reach levels achieved during 2011-12

- MONIKA YADAV

DESPITE the Government's thrust on capex, the private sector is not very enthusiastic about capacity expansion in the country. Many factors, particularly global uncertainties, are the main reasons behind the lackluster growth in private investment.

Private investment has picked up from the lows of 2016 and 2017 but it is yet to reach the levels achieved during 2011-12. According to the government data, private investment at both the current and constant prices was 27% of the gross domestic product (GDP). However, in 2016 and 2017, it plunged to 21.3% of GDP at current prices. In constant prices, it stood at 22.7% of GDP in 2016 and 23.2% of GDP in 2017. Then, in 2023 it gradually picked up to 23.8% of GDP at current rates and 25.7% of GDP at constant rates.

"We observe that the investment as a % of GDP at constant prices is much higher than investment at current prices and the difference has increased substantially during the recent years. Inconsistency is being driven by the variation in GDP deflator. Given that the households and corporations base their decisions on nominal numbers, I prefer to use nominal numbers for assessing the progress we are making in building capacity for growth," said Anil K Sood, professor and co-founder, Institute for Advanced Studies in Complex Choices (IASCC).

Private investments include both investments by corporations as well as households.