The share of private non-financial corporations in gross fixed capital formation, a proxy for investment, dipped to its lowest level of 36.2% in FY23 compared with 36.3% in the previous fiscal, as per the latest National Accounts Statistics.
Meanwhile, the government share in real terms went up to 13% in FY23 from 12% in FY22. “States share may have increased more, as they stepped up investments in FY23,” said Paras Jasrai, senior analyst, India Ratings and Research.
Public non-financial corporations or public sector companies were the worst performers as their share in investment declined to 9.4%, the lowest level in 12 years.
The share of households in investment declined to 40.5% in FY23 from 41.4% in FY22. Jasrai notes that there is likely to be a marginal increase in the share of households in FY24. A sectoral comparison shows that the share of real estate, ownership of dwelling and professional services, hotels and restaurants and public administration and defence increased in FY23. Real estate accounts for a fifth of the total investment by the country in real terms, followed by manufacturing which accounts for nearly 16% share. The share of public administration and defence was nearly 10% in FY23 compared with 9.1% a year earlier. Communication & services related to broadcasting witnessed their share increase to 4.9% from 4.4% earlier, whereas the share of construction declined as the investment in the sector shrunk.
The gross fixed capital formation rose 6.6% in FY23, easing from 17.5% in the previous year. Investment is the primary driver of growth in FY24 and is likely to be a significant driver in FY25. Investment expanded by 10.2% in FY24. The International Monetary Fund, in its latest forecast, noted that public investment will be the major driver of growth in FY25 as the economy expands by 6.8%.