Investment rate stagnates in last three years: CARE Ratings

The country's investment rate as a proportion of its GDP (Gross Domestic Product) has stagnated since FY15. Investment has been on the wane since 2011-12 when it accounted for a share of 34.3 per cent. According to the second advance estimates of the Ministry of Statistics & Programme Implementation, the share of investment to GDP had slid to 28.5 per cent at the end of 2017-18.

The decline in investment has been due to NPA (non-performing assets) overhang, excess capacity in several industries, the high cost of funds and tepid demand conditions.

"Investment in FY15-FY18 was mainly led by public investment. Private sector investment has tended to lag and while the government has cleared the plethora of stalled projects, their intrinsic viability has been affected at times or market conditions have changed leading to non-revival of these projects. This is expected to change in FY19 albeit in a gradual manner", a report by CARE Ratings states.

The report goes on to say that economic output and growth has not witnessed the expected pick up in the last four years. The disruptions caused by the structural reforms of demonetization followed by GST implementation along with the paucity in investment demand lowered/reversed the domestic economic growth trajectory in the last two fiscals. Gradual recovery has been seen in the domestic economy which is however likely to strengthen going ahead, the report added.

The energy deficit stayed range bound in 8-10 per cent during 2011-13 but improved in 2013-14 to 4-4.5 per cent. The improvement could be attributed to rapid addition in thermal capacity in the private sector, which led to increase in electricity production. As of FY18, the energy and peak deficit contracted to 0.7 per cent from 4.4 per cent reported at the beginning of FY15 indicating sizable improvement in power supply to demand. This indicates improvement in electricity evacuation and power distribution infrastructure.

At major ports, the cargo handling capacity moved up by 139 million tonnes during 2011-15 across 12 major ports in the country which are primarily managed by respective port trusts. During the period 2015-18, the cargo handling capacity addition stood at 486 million tonnes across the 12 major ports, an increase of around 250 per cent.