India's public and private sector investment in the last decade is more than the investments made in the previous 7 decades

Ronit Kawale
Ronit Kawale - Senior Editor
5 Min Read

According to a report presented by DSP Asset Managers, India spent US$8 trillion on new investments in the last decade, more than half of the investment made since the country's independence.

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Over the past seven and a half decades, since India's independence in 1947, US$14 trillion has been spent on investment, including spending on housing by households, infrastructure creation by the government, and private capital expenditure.

India has spent US$8 trillion on new investments in the last 10 years. The government has been increasing capital expenditure allocation in each of its annual budgets.

Investments made in the last decade are expected to be replicated over the next five years as the base becomes larger, the DSP report said.

It says, “India's annual investment is becoming too large to attract your immediate attention.”

The report claims that India has come out of the investment winter season.

The investment to GDP ratio (measured as gross fixed capital formation to GDP) peaked in 2011 and remained low until supply chains were hit due to Covid.

Investment is coming back on a large scale through reforms and government spending after the pandemic.

“The global economic scenario is a bit volatile, but India remains a steady ship in turbulent waters. “Economic growth remains strong with sustained growth in corporate top lines and profits.”

Presenting a graph in support of its arguments, the report said that in the last 12 months, most economies have seen a slowdown in their manufacturing sector or services or both.

India's manufacturing PMI can be seen at the top.

“India has seen a steady growth in economic output and business sentiment last year,” it said.

“Its different economic trends have been long anticipated, though never fully realised. But in the past year, India has shown a resilience that is perhaps the first evidence that India’s economic and business cycles can withstand global turmoil of manageable magnitude.

It said that behind the country's development story is a stable external situation.

Most emerging market currencies are struggling with negative carry against the US dollar, which has forced the central banks of these countries to be cautious in setting FX policy and their interest rates.

The rupee in India has remained stable over the last year, helped by a mix of a strong current account, robust FPI flows (especially in debt markets) and a wait-and-watch approach from the RBI.

“Strong service flows and remittances have been a key pillar of support that has kept India's macroeconomic outlook stable.”

Referring to India's stock markets repeatedly touching new heights, it said that India has now become the second largest equity market among emerging markets. India's share in emerging markets has increased from 7.8 per cent in 2020 to 17.7 per cent at present.

This substantial growth is primarily attributed to the increased profitability of companies, which has surpassed their pre-Covid growth rates and the consistent performance of equity indices provides the rationale for this stellar performance.

Explaining what contributed to corporate India's healthy level of profits, the report said Indian companies' growing earnings and stable profit margins and relatively stable fiscal and tax regimes helped.

However, it also warned that Indian equities are no longer a bargain and lack safety.

India's gross domestic product (GDP) size currently ranks 5th after America, China, Germany and Japan. It overtook the UK in 2022.

Just a decade ago, Indian GDP was the eleventh largest in the world. Currently, India's GDP is estimated to be around US$3.7 trillion.

India's GDP grew by a massive 8.4 per cent during the October-December quarter of FY 2023-24 and the country remains the fastest growing major economy and is set to maintain its growth momentum going forward.

According to the International Monetary Fund's latest world economic outlook, India will remain the fastest growing economy among major economies in 2024. The IMF has raised India's growth projection for 2024 to 6.8 per cent from 6.5 per cent in its latest scenario.

India's economy is expected to grow by 7.2 per cent in 2022-23 and 8.7 per cent in 2021-22, respectively.

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