Private Investment as Gross Fixed Capital Formation (GFCF)
- GFCF refers to the growth in the size of fixed capital in an economy. Fixed capital refers to assets like buildings and machinery for which investment is needed.
- Private GFCF serves as a rough indicator of private sector investment. Overall GFCF also includes capital formation as a result of investment by the government.
- Private Gross Fixed Capital Formation (GFCF) as a percentage of gross domestic product (GDP) is measured at current prices
- Private investment witnessed a steady decline since 2011-12, hit a low of 19.6% of the GDP in 2020-21.
- In an exceptionally slow start to private capital expenditure for this financial year, new investment plans in India plummeted to a 20-year low in April-June 2024, with only ₹44,300 crore in fresh outlays announced by corporates compared to 7.9 Lakh crore in the same quarter last year.
- Last year saw ₹27.1 lakh crore in investment announcements, the second highest in a decade.
- Despite steady economic growth, the sluggish investment plans are attributed to a wait-and-watch approach by industries.
- April-June 2024 was exceptionally low for investment announcements, based on data from the Centre for Monitoring Indian Economy (CMIE).
- High investment announcements from the past two years are yet to run their course, contributing to the slowdown.
- Corporate bond issuances dropped with most raised by financial services.
- Investments may pick up in the second quarter, influenced by the budget announcement in July, a good monsoon, and steady festival season demand.
- This pattern of slow investment may continue as existing plans are fully executed.
Dig Deeper: Why has private investment fallen?
