While headline gross domestic product (GDP) grew by a healthy 7 per cent in Q3FY17, investment activity continues to be moribund. As Chart 1 shows, gross fixed capital formation as a percentage of GDP has been consistently falling. In fact, as seen in Chart 2, even in the new index of industrial production (IIP) series, capital goods, a proxy for investment demand, grew at a mere 1.9 per cent in FY17.
With the private sector unwilling or unable to invest, the burden of reviving investments has fallen on the public sector. While public sector capex has grown at a much faster
