E-Paper
Govt plans survey of lagging private capex
The ‘forward looking’ survey will look at all kinds of capital spending by the private sector for the last three years and also put out estimates for the next two years for first time, counting fixed assets by type
The statistics ministry is planning to conduct a survey of private-sector capital investment going into the economy, which has been lagging government capex but is critical for growth and jobs in Asia’s third-largest economy, a senior official has said.
The “forward looking” survey will look at all kinds of capital spending by the private sector for the last three years and also put out estimates for the next two years for first time, counting fixed assets by type.
Private sector investment has grown at a slower pace, outstripped by government fixed capital formation (GFCF), a measure of public spending on assets and infrastructure, although there are signs of a pick-up.
The Modi-led government has budgeted ₹11.11 lakh crore of capital spending during 2024-25, or 3.4% of GDP. In 2019, the government had cut corporate taxes from 30% to 22%, hoping the move would boost private investment.
Investment in infrastructure, such as machinery and equipment, ports, airports and highways, is a key driver of growth. Government economists have pointed to the need for a faster pace of private sector investments, hoping that government’s own spending will “crowd in” private expenditure.
“The ministry is planning a forward-looking capex (capital expenditure) survey to fill the gap in private sector investment. The survey on private sector capex intentions, along with other surveys, is aimed at compiling information which will assist central and state ministries, and industries,” Saurabh Garg, secretary of ministry of statistics and programme implementation said.
“Early corporate sector data for FY24 suggest that capital formation in the private sector continued to expand but at a slower rate,” the government’s Economic Survey 2023-2024 unveiled in July states. India’s growth has largely come on the back of heavy public investments in the last several years, especially since the pandemic, the survey added.
“One of the reasons for sluggish private investment is lower consumption growth. Along with it, higher cost of capital (or loans) has contributed to this,” said Ishwar Anand, an economist with Delhi University.
Between FY19 and FY23, the cumulative growth in private sector non-financial GFCF stood at 52% in current (inflation unadjusted) prices, official data show. During the same period, the cumulative growth in capex spending by government (including states) was 64%.
Although that’s not a huge gap, private spending in job-creating assets, such as machinery and equipment, grew only 35% while investment in “sunk costs” towards buildings and dwellings grew 105%. “This is not a healthy mix,” the survey had noted.
