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Thursday, 24 October 2013 00:23
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Amid all the gloom, keep in mind that R30 lakh crore get invested in the economy each year

When the finance minister gave details of R3.2 lakh crore of projects that had been put up for financing with various public sector banks since April, not too many were impressed. Given the mood with industrial production continuing to collapse and not too many big investments being announced, it’s not hard to understand why the FM’s good news fell on deaf ears.

While it is a good idea to be sceptical and keep the government on its toes, some perspective is needed. At even the current low levels of investment—gross fixed capital formation fell from 32.9% of GDP in FY08 to 29.6% in FY13—it’s worth keeping in mind this means R30 lakh crore of investments will still be made in the economy. And while it is true it is the Vedanta problems that get the headlines in newspapers such as this one, it is investment by small firms and households—the CSO even calls this category ‘household investment’—that is larger in size. Indeed, in FY12, while the public sector—this includes government and PSUs—invested 7.4% of GDP and the private corporate sector 9.7% of GDP, the ‘household’ sector invested 13.6% of GDP. So while private investment collapsed and public investment fell a little slower, ‘household’ investment rose. That may not be cause for jubilation, but it’s not the end of the world either.


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