Why so down, private investment?
Narendra Modi urged the private sector to step up its efforts in job creation and investment. Earlier this year, Nirmala Sitharaman had admonished the private sector for not scaling up investment, despite a generous corporate tax cut in 2019. A similar warning was sounded in FM's latest budget speech to states when she informed them that exclusive dependence on the Centre for large infrastructure projects was untenable because of the impact on the cost of borrowing on borrowers down the line.
The appeal, admonishment and warning stem from a similar concern. GoI can't be expected to run the economy single-handedly without participation by all stakeholders. It should be an 'enabler' by making contributions on the supply side through improved physical infra, investing in human capital and through better governance to improve the ease of doing business.
Addition of permanent assets in a country is commonly measured as gross fixed capital formation (GFCF), typically stated as a percentage of GDP. GFCF normally rises during periods of sustained economic growth and is lower when the economy slows. In the Indian context, GFCF as a share of GDP rose between FY04 and FY08, peaking at 37.5% of GDP in FY08.
The 2007-08 global financial crisis (GFC) sharply slowed this expansion. Growth of GFCF registered a secular decline since then, though it has picked up in recent years, thanks mainly to extensive government spending on physical infra. GFCF as a share of GDP in FY23 is 34% of GDP. But the share of the private sector in
