Investment pipeline in economy chokes as key indicators show deterioration

Gross fixed capital formation - an indicator of investment demand -as a percentage of GDP, fell to nearly two-decade low

The investment pipeline in the economy is choked with four out of the six key indicators - investment rate, bank credit offtake, industrial production of capital goods, and new investment projects showing deterioration while investment intensions and market borrowings have shown some signs of resilience. These parameters are likely to see a downward revision with coronavirus — the impact of which will play out in the coming months.

Gross fixed capital formation (GFCF) — an indicator of investment demand —as a percentage of GDP, fell to nearly two-decade low. It is estimated at 27.5 per cent of GDP as per the second advance estimate for FY20 – lower by 1.5 per cent a year ago. GFCF is estimated to contract by minus 0.6 per cent for the first time in the past 17 years. This number may be revised downwards as the year-end phenomenon of increasing investment in March will not materialise.