India Inc has not participated in revving up the capex spend in recent years at a broad-based level. But against the backdrop of structural reforms undertaken over the last few years and cyclical improvement in demand impulses in the post-pandemic world, today's favourably aligned macroeconomic variables should pave the way for a decisive turnaround in the private capex cycle late FY23 onwards.
First let's take stock of what FM Sitharaman has highlighted: the disappointing state of private investments despite Gol and RBI both trying to revive animal spirits via structural and cyclical measures.
Gross fixed capital formation (GFCF) as a percentage of GDP peaked at 34.3% in FY12 and since then has remained lower in the range of 30-32% broadly.
Share of the manufacturing sector as a percentage of GVA topped at 18.4% in FY18 but succumbed to a low of 17.1% in FY20 owing to the pandemic.
While FY22 saw the share revert close to the pre-pandemic level, it remains well below the policy vision of 25%.
As a fallout, labour force participation rate for India has seen a monotonic decline, slipping below 40% in 2022 a moderation of nearly 3.2% compared to pre-pandemic levels.
The question is, what drives private investment in India? We undertook a regression analysis to find an analytical answer to the question. Two conclusions stand out.
This story is from the September 15, 2022 edition of The Times of India Hyderabad.
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This story is from the September 15, 2022 edition of The Times of India Hyderabad.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
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