One of the key factors holding India back in the last few years is the subdued private investment in the economy.
The Central Statistical Office (CSO) has revised its GDP growth estimate for 2017-18 to 7.2 per cent and 2016-17 to 8.2 per cent. The official estimates have once again put India at the pole position among the fastest growing major economies in the world.
The revised GDP data show a pick up in private investments since 2013-14. However, data from the other sources do not support the argument.
One of the key factors holding India back in the last few years is the subdued private investment in the economy. Pointing out towards the need for an active participation by the private sector, Madan Sabnavis, Chief Economist, CARE Ratings recently told Financial Express Online: “At the end of the day the product or service needs to be bought, for which there has to be demand and the government can only provide limited demand from its budget”. The private sector is needed create jobs, income, spending power, better capacity utilization rates and so on, he said.
The available data presents two conflicting views. The CSO data shows a growth of 7.6 in the Gross fixed capital formation (GFCF) during 2017-18 and expects it to grow at 12.2 per cent in FY19. On the other hand, looking at sector-wise details, it can be said that the growth has largely been consumption driven as the credit growth to industry still remains weak, Renu Kohli, a macroeconomist, wrote in The Financial Express this week. The real credit to industry contracted by an average of 1.7 per cent each month in April and December 2018, she added.
Further, the data from the Centre for Monitoring Indian Economy (CMIE) show that during 2017-18, announcement of new investment projects declined by 38.4 per cent , and 11 million people lost their jobs in 2018. Moreover, while the total FDI in the country during 2016-17 increased to $36.32 billion, the FDI in manufacturing sector remained sluggish at $11.97 billion, noted RBI.
Madan Sabnavis had suggested that the government must maintain its focus on infrastructure development and resolve the NPA issue with utmost priority in order to attract private investments.