Indian Express Editorial Summary : Reviving the Investment Cycle in India

GS-3 Mains 

Short Notes or Revision Notes 

Question : Analyze the recent trends in investment rates in India, highlighting the sectors driving the growth and the challenges faced in reviving the investment cycle.

 

Investment Rate:

• Increased from 30.8% (2022-23) to 31.3% (2023-24).
• Still below pre-pandemic level (27.2% in 2020-21).
• Construction dominates investment (59% in 2022-23).
• Share of plant and machinery has declined (36% in 2017-18 to 30.7% in 2022-23).

Private Sector Investment:

• New investment announcements:
  • ₹27.1 lakh crore in 2023-24 (2nd highest in a decade).
  • 85% from private sector, 11% from foreign companies.
• Debt issuances:
  • ₹11.1 lakh crore in 2023-24 (higher than 2022-23).
  • 71% from financial services sector.

Investment by Sector:

• Power Sector:
  • Highest share of announced investments.
  • Driven by renewable energy expansion and PLI schemes.
• Transport Sector:
  • Airlines planning fleet expansion (import-driven, limited domestic industry linkages).
• Other Sectors:
  • Chemicals, machinery, metals, and auto industries showing signs of increased investment intentions.

Investment Trends in India

Sectoral Breakdown:

• Power, transport, chemicals, machinery, metals, and auto industries account for 90-92% of investment announcements.
• Consumer goods industries absent despite PLI schemes.

Private Sector Investment:

• Picking up, but not broad-based.
• Reliant on government capex (e.g., metals and machinery for infrastructure projects).

Reasons for Consumer Goods Lag:

• Excess capacity in these industries.
• Demand affected by:
  • Lack of high-paying jobs.
  • Uncertain farm production impacting rural demand.
  • High inflation eroding purchasing power.

State Government Investment:

• Lagging behind targets (e.g., spending ₹6.08 lakh crore vs target of ₹7.32 lakh crore in 2022-23).
• Significant share of overall investment, impacting national cycle.

Overall:

• Central government meeting capex targets, but private sector and state government trajectories uncertain.