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Recovery postponed: Survey indicates private sector has become cautious

2 min read

Post-Pandemic Economic Growth in India

After a strong recovery from the pandemic-related disruptions, the Indian economy is projected to grow at a rate of 6.5% in 2024-25, with similar projections for the current year. However, to achieve broader economic goals, a higher growth rate is necessary. Sustainable growth will require enhanced activity across various segments of the economy.

Government and Private Sector Investment

  • Higher Government Capital Expenditure: Post-pandemic, there has been a notable increase in government capital expenditure aimed at promoting growth and encouraging private investment. Nevertheless, private investment has not increased as expected due to several factors. 
  • Private Sector Investment Survey: In response to a parliamentary recommendation, the National Statistics Office has begun a survey to assess private sector investment intentions. The first survey results, despite stemming from a small sample, offer insights into private sector expectations. 
    • 2,172 enterprises participated, with criteria based on turnover thresholds: manufacturing over ₹400 crore, trade over ₹300 crore, and others over ₹100 crore.
    • Survey results indicate a significant increase of over 55% in capital expenditure for 2024-25, but a cautious outlook for 2025-26 with a 25% projected decline.

Global and Domestic Economic Challenges

  • Global uncertainties, especially due to trade-policy shifts in the US, pose challenges. Although projections suggest limited impact on India, the environment remains uncertain, affecting global investment behavior.
  • Positive developments include ongoing negotiations for a bilateral-trade agreement with the US, which could provide clarity and opportunities for India.
  • Multinationals diversifying from China present investment opportunities for India, such as Apple's interest in moving iPhone production for the US market to India.

Domestic Policy and Economic Outlook

  • Monetary policy could support growth through potential interest-rate cuts, but the Reserve Bank of India needs to balance these with potential risks.
  • Despite higher government spending, private investment remains a weak point in India's economic growth story, further delayed by current uncertainties.
  • Tags :
  • Private Sector Investment
  • Post-Pandemic Economic Growth
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