Despite significant profits, India’s private sector is grappling with a notable decline in investment, raising questions about the future of corporate expenditure in the country. Recent data reveals that private investment as a proportion of the gross domestic product (GDP) has reached a ten-year low, dropping to 33% in the current financial year.
Factors contributing to low private investment
The trend of reduced private sector investment has persisted since the global financial crisis of 2007, despite India’s economy achieving impressive growth rates. Following a brief revival in 2022 and 2023, the investment climate has once again weakened. A recent analysis by Icra, which assessed 4,500 listed and 8,000 unlisted companies, indicates that while listed firms have slowed their investment pace, unlisted companies have even reduced their capital expenditures.
Uday Kotak, a prominent banking figure, has voiced concerns regarding the diminishing