The new public investors

With the Centre focusing on fiscal consolidation, public investments by state governments spur infrastructure development

The missing piece in India’s GDP growth story — investments — has made a slow but firm comeback. What’s more, our analysis shows it is the states and extra budgetary resources of the public sector units (PSUs), and not the Centre’s budgeted outlay, that are driving this comeback.

First, the overall figures. Fixed investments grew 12.3 per cent on average in real terms in the past three quarters, compared with 5.3 per cent in the previous three. Overall investment ratio (share of gross fixed capital formation in GDP) rose to 31.4 per cent in fiscal 2018 from 31.1 per cent in fiscal 2017 and 30.3 per cent in fiscal 2016. That remains below the 34 per cent plus achieved in fiscals 2012 and 2013