Private investment conundrum: Policy intervention to improve prospects

India's gross fixed capital formation at constant prices is expected to be at 33.4 per cent of GDP this financial year

The Union government has increased capital expenditure after the pandemic-induced disruption. Aside from supporting demand during the recovery phase, the implicit assumption was that, at some point, the investment baton would be passed on to the private sector, which will sustain growth. The Union government’s capital expenditure increased from 1.67 per cent of gross domestic product (GDP) in 2019-20 to 3.4 per cent in 2024-25. Although the recovery from the pandemic was sharp — partly driven by statistical effects — revival in private investment has remained tepid. It is worth noting that the weakness in private investment goes back to