iNDICA NEWS BUREAU-
The Indian economy is among the few in the region where investment rates rose between 2015 and 2023, a report showed on Monday. The broad narrative around the pick-up in the investment upcycle is that it is driven mostly by the public sector, led by the Central government, according to a research note by DBS Bank.
According to Radhika Rao, Executive Director and Senior Economist, and Daisy Sharma, Data Analytics, DBS Bank, the private sector has led the pickup in capital formation post-pandemic, driven by households. “Overall gross capital formation (GCF) rose to 33 per cent of nominal GDP in FY24, better than in recent years but still lower than a decade ago,” the report mentioned.
Digging deeper, the composition of investments showed that the share of the public sector in GCF was at 22% in FY23, with the rest accounted for by the private sector – corporates and households – making up the bulk of the overall GCF.
Within the private sector, households led the pack with a 40% share in FY23, followed by non-financial corporates at 37%.
“Household investments rose to the highest in a decade in FY23 and, alongside corporates, totalling 25% of GDP. Public sector financial as well as non-financial entities and general government comprise the rest 7% of GDP,” read the note.
According to the note, dwellings and buildings have been at the forefront, also reflecting higher public sector participation.
“An upturn in machinery and equipment is a work in progress. We see similar stirrings in the sectoral breakdown as well. Lastly, we construct a multivariate regression model to gauge the drivers and outlook of gross fixed investments,” said Rao.
