India: Private sector's share in capital formation hits 11-year low
What's the story
India's private sector investment has hit a new low, as per the latest data from the Ministry of Statistics and Programme Implementation.
In FY24, the private sector's share in gross fixed capital formation (GFCF)—a critical indicator of investment in physical assets—stood at 32.4%.
This is lower than the 34% recorded in FY13 and a sharp decline from over 40% in FY16.
Investment shift
Government and PSUs step in to fill investment gap
With the private sector pulling back, both the Indian and state governments have stepped in to fill the investment gap. Their combined investments now account for more than 25% of GFCF.
The central government alone contributed over 13% in FY24, a jump of over 2% from FY23 and a significant rise from about 10% in FY13.
Public sector undertakings (PSUs) have also raised their spending, contributing 11.8% to capital formation in FY24 compared to 10.2% in FY13.
Sector contributions
Household sector remains largest contributor to capital formation
Despite a small dip, the household sector continues to be the single-largest contributor to India's capital formation.
In FY24, households accounted for 41% of GFCF, which is down about 1% from the previous year and lower than the 43.7% recorded in FY13.
The data noted that this sector "has basically stood the test of time," highlighting its resilience amid changing investment dynamics in India.
Information
A look at the investment trend
The latest trend is a reflection of the change in composition of investment in the Indian economy. Over the past 10 year, the private sector's role has weakened. Meanwhile, public investment (both by government and PSUs) has only gone up.