As per the first advance estimates of national income, released by the National Statistical Office in early January, the Indian economy is expected to grow at 7.3 per cent in the ongoing financial year. This growth estimate has surpassed even the most optimistic assessments by analysts.
Now, a study by economists at the RBI notes that this stronger than expected growth is “underpinned by a shift from consumption to investment”. Investments, as measured by gross fixed capital formation, are estimated to grow at 10.3 per cent in 2023-24. Growth this year will push the investment to GDP ratio (at current prices) to 29.8 per cent in 2023-23, up almost one percentage point from 28.9 per cent in 2021-22.
On private corporate sector investments, the study notes that public sector spending is beginning to crowd-in private investment, “as high corporate profitability… has begun to induce creation of fixed assets”. However, as per a report by economists at Bank of Baroda, new investment announcements during April-December were at the lowest levels in recent years (excluding 2020). Moreover, of all the new investments announced, almost half of them can be traced to the aviation sector, where airlines have placed large orders for new aircrafts. Gross inward foreign direct investments have also fallen by 4.1 per cent to $47 billion during April-November. So while private investments may have picked up in some sectors, there is little indication of a broad-based pick-up in corporate investment activity.
